One of the Fed Presidents said today he would stop Quantitative Easing if he had his way. He finds the results of this practice sketchy, and I agree, it seems to be doing more harm than good.
Low interest rates with low risk means safe harbors for cash. The global markets are awash in cash with to few opportunities. We even have cash flowing into residential Real Estate which pushes up competing bids for the same properties. The first time buyer has very little chance against an all cash investment purchase.
In terms of Real Estate, which has become extremely volatile, it would be one of the last places cash would go, yet here we are. It looks more like a pump, and dump to me, with investors hoping for quick profits by over heating the market place.
Banks have found more money in lending to each other than to the consumer, even though the consumer is paying stupid prices for everything due to low financing costs. Once you take low monthly payments off the table the price of things goes down.
Cash is already leaving commodities, like gold, and oil. The price of oil, and gas are declining which adds to my idea about deflation. The global economy is slowing, in order to get more cash circulating we have to make thing more affordable.
Let me repeat, once you take low monthly payments off the table, prices have to decline. When it’s no longer smart to buy with a credit card, or loan, pricing is all that is left.