Jim Grant on the great interest rate suppression experiment

An interest rate is a price.  Prices convey information.  Distorted prices convey misinformation.  Build a new factory?  Reckon the value of a future cash flow?  Deduce financial risk from a credit spread?  Manipulated rates give you the data you need to arrive at the wrong conclusion.

Like the flu, mispricing is communicable.  Like a sneeze, arbitrage transmits the disorder from one place, and one asset class, to the next.  Pygmy interest rates lead to tiny real-estate cap rates and towering equity P/E multiples.

~ Jim Grant, "Meet the Carrefour S.A. senior unsecured 1 3/4s of 2022," Grant's Interest Rate Observer, September 22, 2017