Low interest rate policy drives up equity risk premiums

Central bankers and economists close to them attribute the historically low interest rates above all to the current economic conditions. If interest rates were permanently low due to a "secular stagnation" of the economy, one would expect that equity investors would have taken this into account in stock prices.

However, this is not the case. The risk premiums on equity investments are exceptionally high, suggesting that investors view the situation as fragile and therefore dangerous.

Since the central bankers have set themselves the goal of falling into Adam Smith's "invisible hands" in the credit market and having to steer them, it would only be logical for them to take control of the stock market in the next step.

Please note: This study is available in German only.