The price of productive assets goes up as interest rates fall, this is a simple NPV calculation. Interest rates are low, and have been low in the developed wor

The price of productive assets goes up as interest rates fall, this is a simple NPV calculation. Interest rates are low, and have been low in the developed world for a while. The reason for this has nothing to do with central bank conspiracy theories. The neutral rate of interest is determined by productivity growth, profitability of available investments, and how much capital there is that can be invested in them. The best a central bank can do is 1. be good at detecting where this equilibrium is and reacting to it, and 2. move interest rates at the margins to smooth out the business cycle. Think of it this way. If, in the aggregate, an average business would make a real return of 3% per year, then an interest rate above 3% would discourage all but the best business ideas from being pursued. Likewise a lower rate would encourage investment in worse ideas with lower profit margins. This is one way to think about the "neutral rate of interest." It is determined by exogenous facts about the real economy. Now, we have fewer "profitable ideas" (and lower productivity growth correspondingly), and significantly more savings due to greying populations (people who are older/will live longer require more savings) and cultural tendencies (e.g. higher savings rates in China, Germany). So the neutral rate falls, and the result of that the price of capital goods rises. Central banks' hands are effectively forced by this situation. If policy maintained an artificially high interest rate when the neutral rate is lower, economic contraction would ensue disadvantaging all parties.