A perceptive e-mail from a friend from the world of finance:
I liked Steve Hayes's TWS piece on the Letterman interview. But one additional point.
During the interview Obama said: “Right now, interest rates are low because people still consider the United States the safest and greatest country on earth – and rightfully so.”
First, from an investment perspective, the United States is definitely not the “safest and greatest country on earth.” Under President Obama the United States’ credit rating was downgraded (by Standard & Poor’s) for the first time in the history of the nation. Just last week, Egan-Jones downgraded the U.S. from AA to AA-. In fact, there are many countries with a higher rating from Standard & Poor’s, including Australia, Canada, Denmark, Switzerland, Germany, Hong King, the Netherlands, etc.
Second, interest rates are low ONLY because the Federal Reserve has been buying massive amounts of treasuries. In March 2012, the Center for Financial Stability revealed that 61 percent of the total net debt issued by the U.S. government in 2011 was purchased by the Fed! That’s a stunning figure. Treasury rates have nothing to do with the market’s confidence in the U.S. and merely reflect the belief that the Fed will continue to print dollars to buy U.S. debt. It’s a Madoff-sized scandal that’s being perpetrated on the American people.