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One of the co-authors, Paul Schmelzing, published a paper on how interest rates have been on a general downward trend for a few centuries: * https://www.bankof

One of the co-authors, Paul Schmelzing, published a paper on how interest rates have been on a general downward trend for a few centuries: * https://www.bankofengland.co.uk/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018 https://www.bankofengland.co.uk/working-paper/2020/eight-cen... Interviewed recently on the Finance & History podcast: * https://twitter.com/FinanceHistory1/status/1435170755432624130 https://twitter.com/FinanceHistory1/status/14351707554326241... * https://anchor.fm/carmen-hofmann/episodes/Interest-Rates-e16rp9u https://anchor.fm/carmen-hofmann/episodes/Interest-Rates-e16... His hypothesis (23m) is that capital stock is fairly long lasting, so except for (mostly) wars and revolutions (and plagues), there isn't much demand: people want to rebuild after disasters, and so demand for capital goes up. When things are quiet then there's more just sloshing around with not much to do. The oil shock of 1970s, which caused the most recent spike in the last 40 years (which is tapering), was a fairly unique event for rates.

xyzzyz 5y ago
That interest rates were on downward trend for centuries has already been observed by Adam Smith in “Wealth of Nations” in 1776. He claimed that governments can borrow at 2%, and private borrowers of good repute at 2.5%. Considering that inflation at the time was almost 0%, these were basically real rates, and would today correspond to nominal rates of 4-4.5%. Point here is that in England, rates were already very very low in 18th century.
nonameiguess 5y ago
I would think there has to also be some trend whereby lending to untrusted third parties has actually become cheaper and less risky. As in, creditors have recourse to a court system and police they don't have to personally fund, rather than paying enforcers to find people and break knees. And wages these days are far more stable than hundreds of years ago, so whoever you loaned money to is a lot less likely to suffer drastic life-changing events that leave them unable to pay in a way you didn't anticipate. We also have better data and better predictive models. Insurance is more widespread. Some insurance is directly provided by the government with nearly zero chance of not paying. All of these factors should be expected to make it cheaper to borrow money.
- dnautics 5y ago
  I agree with everything except the courts and police: they don't really do any debt-related enforcement activities anymore. On the other hand I suppose you can cynically note that the police make discriminating between a high credit risk and a low credit risk "easy" by having a (possibly unfair) ultrafilter: "did you spend time in jail"
  - lotsofpulp 5y ago
    I have never seen a credit application ask if you have been incarcerated, nor have I heard of lenders searching people’s criminal records.
    - pvarangot 5y ago
      It's definitely there on some mortgages and I saw it a few months ago on a friends car loan.
    - dnautics 5y ago
      even so, incarceration makes servicing recurring payments much harder, not to mention bail... So (cynically speaking) it's even better because if you are rich you're likely to have your credit unhurt by going to jail.
      - lotsofpulp 5y ago
        That falls under the trivial fact of life being easier if you have access to more money. Surely a lender seeing a history of missing payments is relevant to their business, regardless of the borrowers situation.
        dnautics 5y ago
        Thatsthepoint
        5y ago

xyzzyz 5y ago

That interest rates were on downward trend for centuries has already been observed by Adam Smith in “Wealth of Nations” in 1776. He claimed that governments can borrow at 2%, and private borrowers of good repute at 2.5%. Considering that inflation at the time was almost 0%, these were basically real rates, and would today correspond to nominal rates of 4-4.5%. Point here is that in England, rates were already very very low in 18th century.

nonameiguess 5y ago

I would think there has to also be some trend whereby lending to untrusted third parties has actually become cheaper and less risky. As in, creditors have recourse to a court system and police they don't have to personally fund, rather than paying enforcers to find people and break knees. And wages these days are far more stable than hundreds of years ago, so whoever you loaned money to is a lot less likely to suffer drastic life-changing events that leave them unable to pay in a way you didn't anticipate. We also have better data and better predictive models. Insurance is more widespread. Some insurance is directly provided by the government with nearly zero chance of not paying. All of these factors should be expected to make it cheaper to borrow money.

dnautics 5y ago
I agree with everything except the courts and police: they don't really do any debt-related enforcement activities anymore. On the other hand I suppose you can cynically note that the police make discriminating between a high credit risk and a low credit risk "easy" by having a (possibly unfair) ultrafilter: "did you spend time in jail"
- lotsofpulp 5y ago
  I have never seen a credit application ask if you have been incarcerated, nor have I heard of lenders searching people’s criminal records.
  - pvarangot 5y ago
    It's definitely there on some mortgages and I saw it a few months ago on a friends car loan.
  - dnautics 5y ago
    even so, incarceration makes servicing recurring payments much harder, not to mention bail... So (cynically speaking) it's even better because if you are rich you're likely to have your credit unhurt by going to jail.
    - lotsofpulp 5y ago
      That falls under the trivial fact of life being easier if you have access to more money. Surely a lender seeing a history of missing payments is relevant to their business, regardless of the borrowers situation.
      - dnautics 5y ago
        Thatsthepoint
        5y ago