Loose monetary policy leads to bad investments:
Unfortunately, we don’t know where interest rates would be today in a market free of central bank interference. With ZIRP (zero interest rate policy) seemingly ineffective in reviving the housing market, it is tempting to assume it is having no effect but I think the Fed’s low rate policy is having an impact. Austrian economics tells us that rates held below the free market rate will distort the investment decision process, create malinvestment and destroy capital. The current boom in shale oil and tar sands as well as the disputed Keystone pipeline would seem to fit the bill perfectly. $100 oil prices, a product primarily of expansive monetary policy and a weak dollar, have produced a false boom in what should be non economic oil production. For now, oil can be profitably extracted from shale and tar sands and that has produced a boom in western Canada and North Dakota, among other areas. The oil producers are rushing in and investing billions in production that is only profitable at current prices. If and when we get better fiscal policy that hopefully leads to better monetary policy, the dollar will rise, oil prices will fall and the capital invested in these areas will be wasted. Just as it was the last time this happened in the late 70s, early 80s. If Keystone is built and oil falls to less than about $50, it will end up being a large empty pipe. He might have made it for the wrong reasons, but President Obama’s rejection of Keystone may end up being the best investment decision he’s made since taking office.
This Is Not The Recovery You’re Looking For
Joe Calhoun
http://www.alhambrapartners.com/2012/02/05/this-is-not-the-recovery-youre-looking-for/
There may be hope for you yet:)