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The interest rate on long-term secure assets is the most important price of real and nominal, perhaps the capitalist economy. Explains one about confidence in governments and economics. In recent years, these prices have normalized. The period of Ultra low interest rates, which began in 2007-09, ended with financial crises. It seemed to be returning a normal period. Hurray! But the world does not really look “normal”. Instead we should wait for great new blows?
The UK government gives Gilts related to index since the 1980s. Their productivity history gives three great stories of the evolution of true interest rates in four decades. The first one is one of a large secular landing. In the 1980s, the return product in Gilts associated with the 10-year index was 4 percent. Pandemic and his immediate time fell in the next period minus 3 percent. After that was the overall swing 7 percent points. The second story, the after-financial crisis, the economic decrease of the crisis, how the extraordinary long period of time is zero-zero interest rates. Third, this productivity is the rapid increase in this productivity since the beginning of 2022. We are in a new and less strange world.
Protected securities (tips) productivity from inflation from the 10-year treasury provides a similar image, but this information has been available only since the early 2000s. Since 2013, two series have generally been left with higher productivity in the US version. The difference may be partly due to the pension regulation in the UK, which is also applied to the cruel financial repression in determined benefit pension plans. True interest rates on hints have also reached during the pandemic, but not as much as it is in Gilts associated with the index. As a result, these ratios were united. Thus, about 2 percent of the recent recommendations, about 1.5 percent of the index related gilts.
These levels are also close to where it is before the financial crisis. In this regard, “return to normal.” If we go back to the past, we see that today’s Britain’s index related productivity is very low: in the 1980s, the rates were relatively more than 2 percent today.
There is no crisis to be seen in these numbers. Markets in secure assets do not shout “Default Night”. Neither hyperinflation (even high inflation) for this issue. “
The simple way to look at the latest, in terms of “continuous” inflation rates, which are related to the index and the index related to the index and conventional debt. This spread in the United States has been 2.3 percent, over 2.3 percent of January 2003, this is 3.3 percent in 2003, 3.3 percent, above 3 percent. Given the inflation shock of recent years, the risk of inflation is smaller, the increase in this cavity is small. Markets seem convincing that inflation targets will be hit for a period of 10 years.
In other high-income countries, the productivity story for the usual bonds is in the pattern for the United States and the United Kingdom and is mostly better. On January 1, 2021, amounting to 4.5 percent in the United Kingdom, 3.5 percent in the United States, 3.5 percent in the United States, 3.5 percent in Italy, 3.5 percent in Italy, 3.5 percent in Italy, 3.5 percent in Japan, compatible with the standards before 2008 percent in Japan. Taking this into account, a sharp turning, it would not seem difficult without another big negative shock. Currently, at least 2008-21 the world’s world is over.
Is there any other great shock? Yes. An unusual chaotic policy prisoner of the Trump management can create a shock to animal spirits and therefore investing. Indeed, how much speed of the consensus forecasts is surprising to increase the increase in US growth in 2025. Maybe the humiliation has said Donald Trump would give up Robert Armstrong Taco (Trump Always Chicken Chicken) Trading is labeled. However, the ratio of government sector debts to GDP in high-income countries near the level of 1945 is a high level for historical standards. The United States starts working Financial adjustment in a period of high scoring and financial risk apples. It continues with high financial deficits while attacking creditors with trade and financial policy.
After a long time, the normalization of interest rates after a long time can prove. An open point here is concerned about the “Capital Risk Prize”. This is the space between the measurement path, US capital (reverse) triggered income earnings “Cyclical Adjustable Price / Save Ratio”) and real interest rate. The last time the space (indicates that the excessive long-term return of the capital on the recommendations) was as low as in June 2007. This is hardly a comforting thinking.
At least, As Paul Krugman notesThe policy process in modern US is meaningless. In one moment, important people can decide that the United States is no longer reliable. Those people can contain Americans. Then we could have a great crisis, this time this time it is not to us, walking away from the United States.
Given all these fragments, decline or inflation blows, or even the two are even imagined. Productivity on the most important financial instruments has normalized. But times are abnormal in many sizes. Unfortunately, these prices can explode them, unfortunately. In both cases, it must regulate reality or these products.
