I always hesitate to say this or that “bothers” me. Because that’d be disingenuous.

There are drawbacks (to put it mildly) to life as a solitudinarian. But there are perks too, one of which is that solitude, if it doesn’t drive you to suicide, can be conducive to serenity. And serenity, if it lasts long enough, is anesthetizing. By now, after nearly a decade, I’m anesthetized.

So, nothing much truly bothers me. I’m perturbed occasionally by socioeconomic injustices and certainly by the prevalence of acute physical suffering around the world, but if the context is markets, I’m blithe. Markets, frankly, just aren’t that important in any scheme of things, let alone in the grand scheme.

That said, I do occasionally smirk with something that feels vaguely like irritation at the persistence of the word “warning” whenever someone suggests the cost of money might be something other than free going forward. That is: Feigned or not, we tend to fret about the notion that the neutral rate could be higher, that inflation may not go gently and that as a consequence, cash rates may be meaningfully positive forever.

Take the following headline, for example: “Summers Warns of Interest Rates Well Above 3% Through 2030.” “Summers” is obviously Larry, and as most readers can probably surmise, the linked article is a Bloomberg piece documenting his most recent (paid) remarks to Wall Street Week.

On February 2, Summers suggested evidence is mounting in favor of the notion that r-star is indeed higher, something I’ve discussed on too many occasions to count in these pages, most recently here. He also said bills could average “well above” 3% for the remainder of the 2020s, which Bloomberg “helpfully” (note the scare quotes) pointed out would be more than the double the average since 2001.

Of course, “average” is a hopeless misnomer in this context. Rates were glued to the lower bound for half of that entire period, and even Fed apologists will concede (if only because they have to) that capital allocation decisions were skewed beyond recognition as a result.

I’d be remiss not to note that Howard Marks has written extensively on this prospective shift in two (fairly) recent memos, one called “Sea Change” and the other called “Further Thoughts on Sea Change.”

I recommend those two memos, not necessarily because you’re going to learn anything (all of Marks’s memos are in many respects the same memo) but rather because his overarching point (i.e., that when money isn’t free anymore, capital allocators need to rethink their entire decision calculus) is something many investors are still reluctant to accept.

But we shouldn’t be reluctant to accept a world where money isn’t free. Because unless you’re a nine-year-old getting a twenty dollar bill in the mail on your birthday from your grandparents, money shouldn’t be free. Free money leads to all sorts of suboptimal outcomes irrespective of whether the rationale for making it free in the first place made sense.

This is one issue I have with Progressive economists and some Democrats who, while well-meaning in calling for less onerous monetary policy settings, seemingly don’t understand that the primary beneficiary of free money is most assuredly not Main Street. The primary beneficiary is Wall Street and investors in general. Money was free for a dozen years after the financial crisis and the rich became immeasurably richer as a direct result. (Technically you could measure it, but you certainly couldn’t fathom the associated numbers.)

I personally hope Summers is right. Maybe 3% would be an impediment: That’d represent relatively fierce competition from riskless USD “cash,” which could impede certain kinds of constructive investment in riskier ventures. So let’s call it 2.5%.

If you’re an investor — any kind of investor — and you’re not confident in your capacity to generate returns in excess of 2.5%, then you’re better off in cash anyway. In the meantime, regular people will be able to enjoy enough in the way of interest income to offset inflation, while the kinds of bad investments that invariably accompany free money either won’t be made at all or will at least be constrained.

Consider the simple figure above from BofA’s Michael Hartnett. It’s just the ERP using bills. “The Goldilocks narrative is critical for pricey stock markets,” he wrote, noting that the ERP is now near a quarter-century low.

I realize this all sounds like it could’ve walked out of… well, out of a Howard Marks memo, for example, or out of some resentful bear’s rant about the price of free money. But it’s not that. Really it isn’t.

As I wandered around the city over the weekend, basking in the glory of what, after Friday, counted as one of the single-best simple long positions I’ve ever taken (Meta, which I bought on October 27, 2022, at 2:25 PM ET and sold on Friday afternoon), it occurred to me that as fun as that ride most assuredly was, I derived far more satisfaction over the same period from the monthly income generated by two of my sweep accounts (i.e., bills and repos).

Sure, it’s nice to quadruple your money in a relatively short period of time, but frankly, I don’t much care about that. I can’t buy anything now that I couldn’t already buy before I tossed some money at Mark Zuckerberg when his ship was taking on water. But what I haven’t had in a very long time is a meaningful stream of risk-free income from the loans I make (and roll) to the US government.

To the extent the 15-year absence of such income (during the tyrannical reign of the acronyms — ZIRP, NIRP and LSAP) perpetuated inequality and increased market fragility, then current cash rates seem like a win-win to me. God willing, Summers is right and they persist until 2030.