The seeds of the next crisis
So: very low interest rates, bond yields, and CD yields. The latter don’t even return 1%, and that punishes savers.
Why is the Federal Reserve keeping rates so low? Because debt levels are so high.
The mound of debt can be serviced at low interest rates. There would be defaults if the rates went higher.
But artificially low rates motivate the taking on of more debt!
So the era of late capitalism we’re “enjoying” (!) has three primary characteristics:
1. the financial sphere (paper assets) has grown enormously in relation to the sphere of real economic production
2. a lot of the paper is in the form of debt and so, to avoid a crisis of debt-defaults deflation, the central banks work overtime to keep interest rates artificially low
3. the whole edifice has become dependent upon central bank manipulation of interest rates, the money supply, retail bank reserve levels, etc.
Some say the consequences (observed over the last quarter century) have been and will continue to be boom and bust cycles of increasing amplitude.
