LTCI Watch: Rates

The low rates certainly do some good for federal agencies that issue bonds, and for banks and publicly traded companies with great credit ratings. They also help people who still have old adjustable-rate mortgages and revolving-debt credit cards in place, and affluent, lucky, well-organized people who have never had any life or credit hiccups and can still qualify to get new credit.

But, aside from people using special government programs, such as student loan programs, many fine, classy, bill-paying, employed people have no way to new credit. 

My guess is that, in the real world, Bernanke must have a way to shake hands with a bank president, hint broadly about “His Friends” who want him to be able to refinance his house, and refinance his house, but, if he goes through normal channels, even he’s a credit pariah.

Central bankers need to stop pushing on the interest rate string and figure out a way to help honest, bill-paying people get credit. Otherwise, they are the equivalent of a doctor who tries to cure a patient’s asthma by putting a plastic bag over the patient’s face. Sure, the plastic bag might stop the patient’s wheezing, but it may have other, unwanted effects.

See also: LTCI Watch: Fed governor pay