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Easy money’s winners and losers

Amid the ceaseless chatter about the Federal Reserve’s plans to reduce its bond-buying, it’s largely assumed that we are finally en route toward tighter monetary policy after five years of unprecedented stimulus efforts.

But what if this is just a diversion? What if the more important story is that interest rates worldwide could go even lower and will stay at extremely low levels for many, many years, perhaps even decades, and that much more bond-buying is to come?

That’s what many among the world’s policymaking elite have hinted at this month. If they’re right, expect even bigger gains in stock markets and higher gold prices, but also international currency tensions, soaring real estate prices in selective urban centers, and a potential political backlash from those excluded from this speculative bonanza.

November has seen an intellectual rounding of the wagons as influential thinkers have called for even more aggressive monetary accommodation, perpetuating policies that have left the interest rates of developed countries near zero and central-bank balance sheets bloated. Prompted both by a failure to satisfy tens of millions of Western jobseekers and by disinflationary trends that warn of Japan-style deflation, these people suggest that policy “normalization” is too far in the future to even contemplate.

Source Market Watch

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