Interesting article, but it ignores two the more important aspects of the low interest rate policy that Greenpan has implemented:
1. Interest income to elderly savers 2. Pension liabilities of US companies
Elderly Americans that depend on interest for a portion of their income have basically been decimated. As I think most of these individuals would have a conservative outlook, many would have kept a larger portion of their assets in money market funds or CD's. The recent policy to reduce interest rates has caused these people a massive headache and a huge drop in income.
American corporations owe their workers billions of dollars in future pensions. Most often these companies have not fully funded these plans. Billions are sitting on the books that need to be paid. Unfortunately, many companies are using unrealistic rates of return to calculate the amount due. This, on paper, greatly reduced the liability. However, if realistic rates of return were used in the calculations, the amount needed to fund the liabilities would soar.
Another often overlooked aspect of this problem is the accounting hancky pancky that comes with the funding of the pension liabilities. Often the past surplus from the pension plan have been written into the company P & L statement as "prefunded" or reduced payments. However, the opposite hasn't been done. The recent losses in the stock market have not been taken into account. Furthermore, the hancky pancky continues when funding the liability. Many companies can add to earnings just by funding the liability.
The Greenspan attempt to reduce interest rates and prop up the market may also be an attmpt to resuce the future pension liabilities of US companies.
The recent GM bond issue was just visible aspect of the problem many US companies face and a reason to be selective when purchasin US equities.
