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Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

bankofengland.co.uk

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Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#21

Post by ahepp »

koolba wrote: post #18
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

> ... currencies haven't been debased ... We’ve printed trillions of dollars and Congress is en route to print trillions more. The price for that has yet to be paid.

Yet interest rates have yet to respond (unless I have missed some major news). You are correct to point out the risk, but I don't think we can call it currency debasement yet.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#22

Post by anewaccount2021 »

phkahler wrote: post #15
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

the US budget deficit is rising, soon out of control IMHO. Raising rates is no longer viable without severe consequences. Nobody has seemed to realize that it's the rate of change in interest rates that has an effect, not the absolute level of them (within reason). The stock market is one giant bubble. People talk occasionally about negative interest rates, and wonder how A) that might work and B) how not to have peo…

Rates can never rise. Americans and American corporations are too indebted with no room to finance increased debt servicing costs. The dilemma is the longer rates stay low, the more debt is piled on. Ultimately there must be a complete reset.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#23

Post by lmkg »

kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

It's somewhat surprising because the recognition of "risk" as a concept is much more recent, and its relation to finance and rates much more recent than that. If the relation between risk and rates of return has held for longer than that, then it means that it's an emergent phenomenon of markets without anyone actually using it as an intentional strategy.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#24

Post by kangaroozach »

ahepp wrote: post #21
koolba wrote: post #18

Earlier quoted context omitted.

> ... currencies haven't been debased ... We’ve printed trillions of dollars and Congress is en route to print trillions more. The price for that has yet to be paid.

Yet interest rates have yet to respond (unless I have missed some major news). You are correct to point out the risk, but I don't think we can call it currency debasement yet.

Printing money is debasing currency, no? We are stealing purchasing power from every holder of dollars.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#25

Post by ahepp »

sudosysgen wrote: post #11
bananaboi wrote: post #8

Earlier quoted context omitted.

I think you meant to say "A dollar tomorrow can be worth more than a dollar today".

That would be positive time value.

I believe it would be negative time value?

It is generally assumed that in an inflationary economy, a dollar today is worth more than a dollar tomorrow

The post above seems to talk about deflation.

It's possible we're just using a different sign convention (or perhaps I've missed something more fundamental)

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#26

Post by klodolph »

kangaroozach wrote: post #24
ahepp wrote: post #21

Earlier quoted context omitted.

Yet interest rates have yet to respond (unless I have missed some major news). You are correct to point out the risk, but I don't think we can call it currency debasement yet.

Printing money is debasing currency, no? We are stealing purchasing power from every holder of dollars.

This is incorrect. The value of money will change, and the amount of money will change, but they are not perfect mirrors of each other.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#27

Post by ahepp »

kangaroozach wrote: post #24
ahepp wrote: post #21

Earlier quoted context omitted.

Yet interest rates have yet to respond (unless I have missed some major news). You are correct to point out the risk, but I don't think we can call it currency debasement yet.

Printing money is debasing currency, no? We are stealing purchasing power from every holder of dollars.

Only if the purchasing power of a dollar goes down. I know MMT is controversial, but I think of it more as a focus on empiricism.

Sure, rationality suggests that printing dollars will reduce the value of dollars. But kickstarting inflation is in some ways the entire point, no? And it has remained consistently below FR targets for the past decade (I believe, I'm not an economist and I'm not looking at any charts)

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#28

Post by rland »

voodootrucker wrote: post #5

It took me a while to get it, but this all works in the opposite direction as well. The time value of money can be negative: A dollar today can be worth more than a dollar tomorrow. It's not pretty. When the pie is shrinking the incentives get ugly rapidly. Let's hope this can be a "good" deleveraging, we fix metrics that don't positively correlate with non-zero-sum productivity growth, and on top of that pull the ne…

We're going to have to, at some point, stop relying on exponential growth, and move to a sustainable (i.e. 0% rate of return) environment. For the biosphere's sake that ought to happen sooner rather than later.

If we continue growing the economy at 2-3% YoY we will be extracting all energy from the Milky Way in 1000 years and applying it to the economy. Not probable!

Clearly there is some transition to the upper part of this S-curve and things need to change when we get there. I wouldn't be surprised if we already are there for most sectors.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#29

Post by vegetablepotpie »

kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

> there's been an increase in stability and decrease in risk throughout the centuries.

Wars, disease, and poverty have been on the decline [0], which is great and makes things more stable and predictable, and therefore debt is less risky and less expensive.

It would be great if these trends continue and don’t reverse. However I can’t help but think of the risks climate change will introduce to our world. A world with more extreme weather events is going to chip away at all this stability we have and push us into a less predictable world again [1].

[0] Is the world getting better or worse? A look at the numbers https://m.youtube.com/watch?v=yCm9Ng0bbEQ

[1] How climate change threatens to wreck the economy https://m.youtube.com/watch?v=SMBNWmQcRAc

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#30

Post by dannyw »

lmkg wrote: post #23
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

It's somewhat surprising because the recognition of "risk" as a concept is much more recent, and its relation to finance and rates much more recent than that. If the relation between risk and rates of return has held for longer than that, then it means that it's an emergent phenomenon of markets without anyone actually using it as an intentional strategy.

I don’t buy this. The recognition that when you lend money to someone, they may default, is something that has existed since bartering.

“Risk” has excited forever. Risk is not a new recognition!

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