What the world needs is called a free market driven economy where the Federal Reserve let's rates go back to normal, people with capital get paid to loan money in excess of risk rather than the reverse, companies are encouraged to have low manageable debt and invest in growing rather than buying back stock, investors look to companies that are profitable and grow rather than borrow money and pay dividends, and banks are on equal ground and have to get deposits rather than borrow money for nothing and could care less about people who have assets that want a return for their deposits. Banks actually have to lend money rather than gamble themselves on commodities, trading, and stocks.

If this sounds like a dream, it isn't. This is how America always was until the Federal Reserve sold their souls and decided corruption was better for them than capitalism. Now their policies distort and eat away at every aspect of America's strength much like if your government was run by communists. It is the same. They both create policies that affect economics and now both produce liquidity.

QE must be stripped permanently from the Federal Reserve and any dropping of interest rates below 2% must be approved by Congress or must require proof of a economic downturn and can only be in force during a downturn because the Federal Reserve seems unable to manage itself and is destroying capitalism and America's future because of their distorted self serving ways.

This will cause a economic downturn in the short run. Although it will be bad you are fooling yourself if you don't think it will happen anyway. The longer our economy remains maligned by this Federal Reserve policy the worse it will be. Unless you want your kids growing up in decade after decade of lost generation economics like Japan, we better make the choice to correct what is destroying the goose that lays the golden eggs. That is a free market economy and capitalism, not central bank pampering and artificial liquidity to the few to buy up peoples assets on the cheap when they go bankrupt.

The real danger is this abnormality is pressed onto the public and accepted as fact. It is only this way because the distortion feeds on itself and kills growth, jobs, and encourages mountains of debt that can't be repaid because growth is dead and housing prices inflate and destroy all disposable income just like in Japan.

Good article. Zirpishness is a convoluted state and a strong argument has been made as to why it is here to say forever. Sadly it only stays if growth remains anemic and sadly TBTF banks love it and want it never to end because it makes their spreads artificially large and gives them a trading edge buying stocks and assets because their cost is near zero where everyone else's costs are higher. Of course with TBTF banks it's even larger because they are protected if their bets go down badly by taxpayers too. Thus they are free to take big risks and is why they end up becoming a bigger and bigger part of the stock market.

This is what happens when you get too close to the black hole called QE and persistently low rate policy. That along with out of control government spending kills the economy, capitalism, your country's birth rate, and eventually people starting with the poor. Sadly, it may even get worse. In a black hole you can't escape and then you get spagettified. In this economic scenario a fate equally bad is liable to happen.

Fortunately we now have two examples to see before we go down the black hole drain, Japan and Europe.

Inflation has been raging for a while. The only issue is the gage of inflation conveniently hides the wellspring of it which is the housing and rental costs. Thus they think its good for housing to eat all the disposable income because banks assets go up and some people get richer. The unintended consequence is disposable income drops and people get mad.

If it gets as bad as Japan, the US will not be as kind as the Japanese people who had to live through decades of a dead economy and now many live in cramped living conditions due to absurd housing prices. Both parties need to do something about this before it gets bad. The problem is the issue is more the federal Reserve's maligned policy than the politicians and only Bernie Sanders has realized it. Sadly, although he identifies the Federal Reserve as the culprit, his solutions are more of the same. We need a fiscal conservative and free market person in power, however, the simple fact is weaning us off of the programmed economy track we are on will be painful in the short run.

That's economics and the free market. It is not bad. It is what it is. One can't reap the rewards of capitalism without the whole business cycle.

I would argue it helps certain sectors of the US, however those sectors such as the California Bay Area are already exceedingly expensive. The sad fact is the Chinese capital flight is not big enough to hold up the US real estate market. In reality, nothing is, and when it crashes, being so close to zirp already will not even soften the blow.

One should not dream that there is a cushion from a falling real estate market currently, because if it does fall, everyone who knows anything will say there is no cushion. That takes preparation and sacrifice. Something the Federal Reserve apparently knows nothing about.

How much is banking charge offs tied to energy/oil losses? Although it is bad, it's not unexpected. The real concern is when the house of cards borrowing ends in the rest of the market which seems to still be on the debt binge. Markets tend to overshoot and debt tends to way overshoot until it becomes more expensive. Thus the Fed is constantly trying to make it cheaper without realizing the issue is that debt is growing exceedingly too fast, especially with such a weak economy.

A stable company. The PE is inflated much like the whole market, but that's not their fault and with Fed rates so low it certainly is attractive. As always, it's a good long term play.

Great and informative article covering the nuances of one factor that artificially affects CPI readings and why. Sadly the rise in housing prices and rent adversely affects growth by destroying household disposable income and making people move to smaller and smaller accommodations. Fortunately, the effects of QE and zirp policy hasn't gone on for over a decade like Japan where some now rent coffin sized sleeping quarters when traveling, although living space is already shrinking.

The Federal Reserve's insistence on pumping asset prices with zirp and QE has unintended consequences, only in so much as if they haven't seen what it did to Japan. Wake up America. This policy is destroying America's vibrancy even though on the surface it looks good in the short run. It is encouraging unsustainable debt, asset prices, and business decisions that are by nature anti-growth.

With countries like Greece and Italy in the EU, it will be more likely Germany will want to exit the EU than the Swiss or UK will want back in. That is too bad, there are a lot of good things about unifying trade in Europe. The problem is, they are all obliterated by poor fiscal restraint and misuse of the unified monetary system by many countries and over reaching rules trade that restrict trade rather than enable trade.

It's not like China wants the Yuan to drop. The issue is that the US economy is not doing well and the rest of the world's economy is doing even worse. When people in Europe are willing to invest money for a loss it shows you just how bad people think things will get. Debt itself is not expandable at the rate it is going right now let alone if economic growth shrinks.