(Bloomberg) — Record-low borrowing costs that helped fuel the stock market rebound are insufficient to sustain a U.S. economic recovery, said Steve Miller, the chairman of American International Group Inc. (NYSE:AIG).
“It’s a fool’s paradise,” Miller said on Bloomberg Television today. “We’re basically printing money to keep everybody happy in the short term.”
The Federal Reserve has kept its target interest rate near zero since December 2008 and embarked on three rounds of bond purchases to stimulate the economy. The central bank has slowed the pace of bond buying and Fed Chairman Janet Yellen said yesterday that further changes will proceed in “measured steps.”
“Janet is going to keep rates low for a while,” Miller said in an interview with Tom Keene and Scarlet Fu. “But you can’t keep that going forever. So we need to get real on government spending’
The 10-year Treasury yields 2.75 percent, up from 1.98 percent a year ago. That’s still below the average of about 3.5 percent over the past decade. The U.S. economy expanded for a fourth straight year in 2013, after contracting in 2008 and 2009, and the Standard & Poor’s 500 Index advanced 30 percent.
Executives from some of the largest insurers — which invest mainly in bonds — have cited the harm of low rates. In September, Axa S.A. Chief Executive Officer Henri de Castries said he’d welcome higher rates as an end to ‘‘financial repression.” MetLife Inc. CEO Steve Kandarian said in March that low rates impose a tax on savers and hurt the ability of companies like his own to offer some guarantees.