"Were you listening to me Neo, or were you looking at the woman in the red dress?"
You may recall this line from the movie "The Matrix", when Morpheus points out to Neo that all is not what it seems. Red herrings have always been used to snatch attention away from what is truly important.
Here's one bright red herring everyone is focusing on right now:
Fed Funds are set in a range of 0%-0.25%, the lowest ever if I am not mistaken. A pretty darn exciting red herring, eh?
And how about this one?
Ten year treasury bonds are yielding a measly 2.50%, the lowest in (at least) 45 years.
But what's the importance of the fish above, compared to reality? Take the red pill Neo, because... Reality is the rates at which everyone else gets to borrow. For example, the vast majority of US businesses, as exemplified by Moody's seasoned Baa-rated corporate bond yield, currently at a rather forbidding 8.10%.
And if the spread between corporates and treasuries remains as atrociously high as it is now (see chart below)...
... pretty much, this is the way things are going to go: the Treasury will borrow at near zero rates (assuming it can) to recycle the money into tax cuts, social benefits and make-work (a.k.a. Keynes-work). Revenge of the socialist nerds, big time.
What's next, the Five Year Plan?