Radio Rallies & Reversals - Subsidized Rates, Financial Markets, and the Economy

So yesterday we concluded that low interest rates and debt don't impact long-term economic growth, only real factors such as education, demographic profile, R&D, etc. If you want an example, just look at Japan. So what is the Fed playing at cutting its policy rates to zero?

Continuing on with a summary of Jeremy Grantham's Q3 newsletter, he shows that low interest rates and the resulting increase in debt has a profound impact on market prices. Coupled with year 3 in the Presidential cycle, the impact on market prices is magnified as low rates increase the level of speculation. The economic response to the extra market move in year 3 occurs in year 4, and is entirely due to the wealth effect of rising asset prices due to speculation, not fundamentals.

Is this good or bad, and what are the implications? Keep tuning in as we continue to summarize Jeremy's thoughts.

GB