The RBA’s Message for Investors: ‘Buy Stocks’
We tend not to pay much attention to the monthly Reserve Bank of Australia (RBA) meetings.
Before they’ve met, we know what they’ll say.
It’s obvious. We’ve explained this to you for a long time now.
Interest rates are low and they’re staying low.
Does anyone really expect the RBA to start raising rates?
It seems some people do. And yet yesterday the RBA confirmed it had absolutely no intention of raising rates. And by extension that can only mean one thing for investors…
Do you remember the fallout from the 2008 financial meltdown?
Banks, companies, investors and governments had gotten into a big pickle with too much debt.
A lot of folks couldn’t pay back what they owed.
It caused a run on the financial system.
Things looked really bad.
So governments and central banks came up with a ‘clever’ solution to the problem of too much debt — they decided to issue even more debt.
Genius.
The solution is the problem
Well, now the central banks and governments are at it again.
Except this time the focus isn’t on debt; it’s on debt’s cousin — interest rates.
Western central banks have held interest rates at a record low for nearly six years.
That’s a long time. And they know it too.
They also know that holding rates low for that long will have unintended consequences. It will cause people, businesses and governments to go into too much debt.
It will cause people, businesses and governments to invest inappropriately.
And it will cause people, businesses and governments to buy and build things on the assumption that interest rates will stay low for a long time.
The central banks know this.
So what else can they do…other than keep interest rates at record lows?
Read the rest of this article at Money Morning
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