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That graph basically makes me think there is no "normal" and no trend, it appears to just jump all over the place, widely, continuously. i don't know if that's

That graph basically makes me think there is no "normal" and no trend, it appears to just jump all over the place, widely, continuously. i don't know if that's right, but that's my reaction to that graph!

JumpCrisscross 4y ago
> graph basically makes me think there is no "normal" and no trend You're right. The data shows "across successive monetary and fiscal regimes, and a variety of asset classes, real interest rates have not been 'stable', and that since the major monetary upheavals of the late middle ages, a trend decline between 0.6-1.8bps p.a. has prevailed. A consistent increase in real negative-yielding rates in advanced economies over the same horizon is identified, despite important temporary reversals such as the 17th Century Crisis. Against their long-term context, currently depressed sovereign real rates are in fact converging 'back to historical trend' – a trend that makes narratives about a “secular stagnation” environment entirely misleading, and suggests that – irrespective of particular monetary and fiscal responses – real rates could soon enter permanently negative territory" [1]. Basically, over the very long run, real rates go down 0.6 to 1.8 basis points (1/100th of a percentage point) each year, and tend to be low. We've witnessed a few centuries of extraordinary growth, which mandated resource prioritization, which kept rates high. TL; DR Anyone talking about where rates "should" be based on looking at charts is often talking tripe. [1] https://economics.rutgers.edu/downloads-hidden-menu/news-and-events/workshops/money-history-and-finance/1823-paulschmelzing/file https://economics.rutgers.edu/downloads-hidden-menu/news-and....
redblacktree 4y ago
One pattern I noticed was that the low-to-low was about 40 years. We should probably expect rates to continue to rise over the next couple of decades before subsiding again, if that graph is any indication.

JumpCrisscross 4y ago

> graph basically makes me think there is no "normal" and no trend You're right. The data shows "across successive monetary and fiscal regimes, and a variety of asset classes, real interest rates have not been 'stable', and that since the major monetary upheavals of the late middle ages, a trend decline between 0.6-1.8bps p.a. has prevailed. A consistent increase in real negative-yielding rates in advanced economies over the same horizon is identified, despite important temporary reversals such as the 17th Century Crisis. Against their long-term context, currently depressed sovereign real rates are in fact converging 'back to historical trend' – a trend that makes narratives about a “secular stagnation” environment entirely misleading, and suggests that – irrespective of particular monetary and fiscal responses – real rates could soon enter permanently negative territory" [1]. Basically, over the very long run, real rates go down 0.6 to 1.8 basis points (1/100th of a percentage point) each year, and tend to be low. We've witnessed a few centuries of extraordinary growth, which mandated resource prioritization, which kept rates high. TL; DR Anyone talking about where rates "should" be based on looking at charts is often talking tripe. [1] https://economics.rutgers.edu/downloads-hidden-menu/news-and-events/workshops/money-history-and-finance/1823-paulschmelzing/file https://economics.rutgers.edu/downloads-hidden-menu/news-and....

redblacktree 4y ago

One pattern I noticed was that the low-to-low was about 40 years. We should probably expect rates to continue to rise over the next couple of decades before subsiding again, if that graph is any indication.