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ECONOMY -- Ready For An Era Of Ultralow Interest Rates? Careful What You Wish For

davfordavfor
edited October 2019 in Off-Topic
I concluded at the beginning of the year that maybe things really are different this time and now suspect we will be living in a low interest rate world for at least a few more years. This article takes a fairly broad look at the current situation and what it might suggest for the future.

Here are the section headings:

U.S. Interest Rates Hit Ceiling In 2018
Negative Interest Rates A Dead End?
Extremely Low Interest Rates Breed Market Concentration And Corporate Zombies
Aging Population Slows Growth, Lowers Interest Rates
Fed Rate Hikes Sent Dollar Soaring
Why Low Interest Rates Yield Still-Lower Rates
Does Fed Need New Toolkit Beyond Rate Cuts, QE?
No Way Out?
Time For Fiscal Stimulus?
Modern Monetary Theory
Bailouts And A New Economic World

The article's closing punchline suggests how broadly changes in the interest rate landscape may impact us as investors going forward if low rates are indeed here to stay....
One thing seems clear: Everything investors have learned about not fighting the Fed and interest-rate cycles would go out the window.
https://investors.com/news/economy/low-interest-rates-be-careful-treasury-yields-fed-rate-cuts/


Comments

  • VintageFreakVintageFreak
    Yeah, interest rates are going lower again. I am upset my Vanguard Prime Money Market gave me lower dividend last month. I have low equity allocation in my taxable accounts.
  • Old_JoeOld_Joe
    edited October 2019
    Due to a number of factors here in CA there is presently an oversupply of premium-quality wine grapes. Crops which normally command $4-7k/ton are now lucky to obtain 1.5k. Some growers who have traditionally sold their entire harvest to the same vintners for many years now report that there are ZERO bids for the current crop. In short, there is way too much supply and not enough demand.

    Is it possible that interest rates are so low simply because there is so much money freely sloshing around out there that there is no real demand for more? Or is the supply/demand equation still valid for agricultural produce but "no longer operative" in the financial world?
  • Sven
    What can you do with premium wine grapes if not for wines?

    The global economy is slowing considerably this year. Europe is suffering from lack of demand for their products. Tariff does not help for sure. This article is 3 months old and it points to that Europe is heading into deflation.
    https://telegraph.co.uk/business/2019/06/18/fears-eurozone-turning-japanese-inflation-gauge-dives/

    Dividends among all debt instruments are declining. At what point they reach negative yields?
  • Old_JoeOld_Joe
    @Sven- What I'm trying to get at here is that if no one is willing to pay a decent rate to borrow money then why exactly is that? Is it because, like the grapes, there is already more of a supply than there is a demand? And if that's true, what are the implications for the general economy?
  • Sven
    @Old_Joe, I think you answer your own question - demand. We are facing a slowing economy as demand for services and goods are declining. In bad times consumers would find alternatives to luxury goods, beers in place of fine wines; used cars versus new cars for examples.
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