Ironically, the Fed doesn’t see a bubble in real estate asset prices, so they’re not too worried about a repeat of 2008, but they’re missing the biggest bubble of, literally, 5,000 years.
And where’s that 5,000 year bubble? In their own house, interest rates, or conversely, bond prices. Over 5,000 years of recorded history interest rates have never gone negative (other than a short time on t-bills in the U.S. for extraneous reasons during the Depression, I believe it was.) But now the actions taken by several central banks have driven interest rates into negative territory on government bonds, even bonds as long as ten years.
When this one pops, and investors have to come to grips with the fact that they’re sitting on bonds purchased to yield virtually nothing while they could turn around and buy bonds yielding 5, 6, even 8 percent again, the carnage in the bond market will destroy a good many financial institutions, including pension funds.
But they don’t see any evidence of a bubble...anywhere. Amazing.
Meanwhile, the U.S. Government will be plunging toward banana-republic status because financing the massive debt laid on in recent years will break the budget. No bubble indeed.
I don't see negative interest rates as a "problem" as much as a symptom ... and it's a symptom of a serious deflationary cycle in the economy.