• Says QE3 purchases only one reason for low yields.
• Says low and anchored inflation explain low yields.
• Expectation of high unemployment explains low yields.
• Says low interest rates needed to spur growth.
• U.S. government debt still regarded as safe haven asset.
• Expectations that U.S. economic weakness will continue are pushing down long-term rates.
• Policy will normalize when economy recovers.
• One concern I have is potential that interest rate risk may exist in bank balance sheets.
• Says if QE boosts U.S. growth then world will benefit.
• Won’t deny rate differences do drive capital flows.
• Says rate differences put pressure on exchange rates.
• Fed policy probably not main factor driving flows.
• Emerging markets have tools to manage capital flows.