Fed 'Tapering' Won't Butcher Bondholders

The early 1990s wasn't as bad as people remember, plus the Fed isn't interested in inflicting pain.

A real estate bust battered the banking system and household balance sheets, so the Federal Reserve responded by cutting inflation-adjusted interest rates to their lowest levels in many years. Meanwhile, tax hikes and cuts in government spending retarded recovery. Some savers were able to earn nice profits by using leverage to purchase long-duration financial assets and farmland, while others complained about low rates.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.