But this imbalance between savings/investment and consumption is not the only Frankenstein creation that zero percent yields have created. During the past 6 years and perhaps on average since the beginning of the 21st century, artificially low yields have propelled financial markets and have impacted the real economy in numerous ways which are not well discussed in the financial press nor certainly in Washington, London, Brussels, or Tokyo. I list them below without further elaboration if only because of space constraints. Keeping it short in this case is the right policy.

There may be more that come to your mind but my point should be clear. The global economy’s finance based spine is so out of whack that it is in need of a major readjustment. In this case, even the best of chiropractors could not even attempt it. Nor would a one off Fed Fund increase straighten it out. Major global policy shifts – all in the same direction – are required that emphasize government spending as opposed to austerity and that recognize that competitive devaluations do nothing but allow temporary respite from the overreaching global problem of “too little aggregate demand” versus “too much aggregate supply.” It is demand that must be increased – yes China must move more quickly to a consumer based economy – but the developed world must play its part by abandoning its destructive emphasis on fiscal austerity, and begin to replace its rapidly decaying infrastructure that has been delayed for decades.

What to do as an investor? Recognize that the above recommendations are politically Pollyannaish. The Merkel dominated EU will not change any time soon, nor will Bernie Sanders be elected U.S. president. Global fiscal (and monetary) policy is not now constructive nor growth enhancing, nor is it likely to be. If that be the case, then equity market capital gains and future returns are likely to be limited if not downward sloping. High quality global bond markets offer little reward relative to durational risk. Private equity and hedge related returns cannot long prosper if global growth remains anemic. Cash or better yet “near cash” such as 1-2 year corporate bonds are my best idea of appropriate risks/reward investments. The reward is not much, but as Will Rogers once said during the Great Depression – “I’m not so much concerned about the return on my money as the return of my money.”

In the long run though, the return of your money will likely not pay for college, healthcare, or retirement liabilities. That is the near global conundrum we are faced with as near zero percent interest rates limit capital gains in the future, and if raised too high, will lead to redzone losses. Not much else to say here. Finance based capitalism with its zero bound interest rates has now produced global imbalances that impair productive growth and with it the chances for “old normal” prosperity. Whether you are tall or short, or your portfolio big or small (better to be big!), they’re not going up as much as you hope they would over the foreseeable future.