You saw the posts by Sober Look on the excess risk investors are taking on in the high yield market and the consequences of low yields on US households. Let's make it a trilogy of posts then. There are plenty of other posts today that highlight this problem. And it is a problem. One thing Austrians harp on is the misallocation of resources caused by heavy handed and persistent interest rate market intervention. They are right that the industrial organization and the structure of investment capital priorities is critical to longer-term growth. What we are seeing now is a skew into high risk activities. As I wrote 4 years ago:
1. Inflationary monetary policy leads to an expansion of credit throughout the economy, the basic building block for a boom-bust business cycle.
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.