[quote=joec]I’ve said before that I don’t think interest rates are going up anytime soon…still…
I’d say we won’t see noticeably rate increases for 10 more years+ or longer…
Noticeably as in anything over 5% on the 30 year fixed rate…
One thing you left out that is all over the press now is European country rates for a lot of economies are BELOW the US rate. France is at 1.75% I just saw and a lot of others are at ~2% or so. So France is in better shape than the US with 50% youth unemployment? Uhh, yeah, US can fall further even and there is huge fears in Europe of deflation. They are thinking of having a negative rate in EU soon.
In the end, I think we are headed to be like Japan and rates are going to be low for a long time.
Deflation will be very scary if it comes here. Especially since I got shit loads of debt.[/quote]
Bond interest rates are actually prices (the price for borrowing money), and are set by supply and demand. Low or falling interest rates imply low future expectations of inflation. A weak future economy means low interest rates. That is why european interest rates, even lower than ours, reflects their slower-than-US economic growth rate. And Japan, which hasn’t seen growth in over two decades, has near-zero interest rates. Both Japan and europe are now terrified of the possibility of deflation.
It all boils down to growth. For five years economists, and politicians, have said real growth would return, and thus inflation, and thus higher interest rates. We are now giving up on that scenario.
