In comparison to historical levels, how high are the current interest rates? If we look 700+ years back, present interest rates are not so high:
Academic paper by Schmelzing reconstructs interest rates from archival, printed primary, and secondary data sources.
Loans to kings were quoted at 18%-35%, similar to the current credit card or consumer loan rates.
Long-term trend spanning back to the 1300s is negative, suggesting rates to be low in the long term.
A consistent increase in real negative-yielding rates (real rates take inflation into account).
If money is cheap and abundant, asset price tends to go up.
Why have interest rates been trending downward? There are a few theories:
1) Productivity growth
2) Demographics
3) Economic growth
Will the current rates increase be temporary or can we expect a reversal of the trend?
Leave a Reply