Excerpt:
Europe, Japan—the doctor’s litany of infectious diseases ran on. We have a “subdued economic recovery” in the U.S. where only “100 or so large companies” are cash-rich. Small and medium-size companies, the backbone of the economy, have little “access to credit.” Even the good news—historically low interest rates—is in Dr. Kaufman’s narrative the woeful story of an opportunity lost. “Few investors have benefited from this steep decline in interest rates,” he said.
Kaufman thinks bond investors expected a robust post-2009 recovery. In that scenario, the U.S. government’s heavy borrowing requirements would have crowded out the private sector, which in turn would have quickly led to inflation and higher interest rates. That’s how investors positioned themselves. But the expected didn’t happen. The robust growth never arrived, the private-sector borrowers never re-entered the credit markets in a meaningful way, and so rates unexpectedly fell further. Refinancings have helped only holders of large home loans, big business borrowers, and the U.S. government.
OK. I was thoroughly depressed. But just when I thought I might open up a vein and bleed out all over his carpet, Dr. Kaufman subtly turned the timbre of our talk, not through false hope, but through his dry-eyed look at the world.
Full article: Dr. Kaufman’s Cure – Penta – Barrons.com.
