Posted on 01/17/2020 7:52:23 AM PST by SeekAndFind
Low borrowing rates have made us complacent. The forces are holding interest rates down. However, they are eroding. Highly indebted governments, businesses, and individuals are dangerously exposed to interest rate risk.
In developed countries, many politicians and their pundit enablers say that cheap credit means we don’t need to worry about the debt. Denying reality may be politically convenient, but fact tends to catch up.
Instead of irresponsible short-termism, times of plenty should be used to prepare for lean times to come. Unfortunately, many play Aesop’s carefree grasshopper instead of the prudent ants.
Interest rates can’t stay low forever. They are the price of lending, and prices reflect the relationship between supply and demand. Global interest rates relate the stock of global savings to borrowing, such as investment opportunities.
Global savings, mainly from a growing global middle class, have increased enormously, and funds cross borders more easily. On the demand side, investment opportunities have not been plentiful enough to absorb the savings without interest rates dropping.
The global financial crisis and the Great Recession helped keep rates low, as have more recent international disputes. Interest rates have been driven down to unprecedented lows for a generation, and many assume they are here to stay.
Now, however, rapid improvements in the business climate — reducing the cost of starting and operating businesses — should stimulate expansion in demand for funds. Rapid progress in some of the world’s most populous countries could supercharge this process.
In this way, the World Bank’s Doing Business 2020 report is a warning on interest rates, though it has good news for global prosperity. The report measures how easy it is to start and operate a small- to medium-sized business in each country.
(Excerpt) Read more at thehill.com ...
5% deficit to GDP in the 11th year of an expansion. Usually that would be labelled insanity.
The United States is bankrupt, that’s the only problem. When your bankrupt, doesn’t depend how much more you add on to your bills.
That’s what happens when you are in a fiscally insolvent economy.
I’ve been debt free since 2005.
Sure, I drive an old car and don’t vacation in HI every winter.
But I won’t lose my house either....
The Dems like unlimited credit.
If it gets out of hand they will just declare a debt jubilee, like they did in 1841 and 1934, and leave all their creditors sitting on their thumbs wondering what just happened.
“But I won’t lose my house either....”
Unless property taxes get so high you can’t afford it.
Reply to posts #6 and 7,
That’s why I have my house paid off, drive cars old enough to vote (including a perfect, low mileage convertible for nice days) and the rest in a really good, bolted down safe.
Banks? For monthly in and out. That’s it.
Hear ye, hear ye.
I hear you. Married a long time too... ;)
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