No lesser establishment economist than Martin Feldstein – Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research – has some warning words of wisdom for The Fed today: “…the Fed’s unconventional monetary policies have also created dangerous risks to the financial sector and the economy as a whole.” When even The Ivory Tower is losing faith, you know The Fed is in trouble…

Excerpted from Project Syndicate…

But the Fed’s unconventional monetary policies have also created dangerous risks to the financial sector and the economy as a whole. The very low interest rates that now prevail have driven investors to take excessive risks in order to achieve a higher current yield on their portfolios, often to meet return obligations set by pension and insurance contracts.

 

This reaching for yield has driven up the prices of all long-term bonds to unsustainable levels, narrowed credit spreads on corporate bonds and emerging-market debt, raised the relative prices of commercial real estate, and pushed up the stock market’s price-earnings ratio to more than 25% higher than its historic average.

 

Read the full story here:

via: Even Harvard Economists Admit Fed Policy Has “Created Dangerous Risks”