One curious effect that is becoming evident from the Fed’s ongoing easy money, low-interest rate policies, most recently with beginning purchases of $600 billion of U.S. treasuries, has been to stimulate overseas investment, where emerging markets are growing substantially, reports Bloomberg News.
“U.S. corporations have issued more than $1.07 trillion in debt so far this year, according to data compiled by Bloomberg. Foreign companies also are tapping U.S. markets for cheap cash, selling $605.9 billion in debt through Nov. 15 compared with $371.8 billion for all of 2007,” according to Bloomberg’s David Lynch.
This has resulted in billions of dollars of overseas investments in Mexico, Peru, South Korea, Brazil, eastern Europe, China, India, and Russia, according to the report. These investments “illustrate why the Fed’s second round of bond buying may not reduce unemployment, which has stalled near a 26-year high.” Despite all of the cheap money, it is not being invested here.
In fact, U.S. unemployment has been at or above 9.4 percent for 18 straight months, the longest period of sustained high unemployment since the Great Depression. That result has given cause to Representative Mike Pence (R-IN) to introduce legislation eliminating the Federal Reserve’s dual mandate. Currently the Fed’s statutory mission includes maintaining full employment, a task that it has not succeeded in, despite more than doubling the money supply since the financial crisis began in 2007.
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