Short and Sweet

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The 700-year fall in interest rates

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“How far can interest rates fall?” asks VisualCapitalist’s Dorothy Neufeld, “Currently, many sovereign rates sit in negative territory, and there is an unprecedented $10 trillion in negative-yielding debt. This new interest rate climate has many observers wondering where the bottom truly lies. Today’s graphic from Paul Schmelzing, visiting scholar at the Bank of England (BOE), shows how global real interest rates have experienced an average annual decline of -0.0196% (-1.96 basis points) throughout the past eight centuries.”

The question begging an answer is: What happens economically once we hit bottom? “Although this may be fortunate for debt-seekers,” says Neufeld, “it can create challenges for fixed income investors—who may seek alternatives strategies with higher yield potential instead.”  Or, perhaps, saving in a kind of money other than the local currency – one that actually stores value over time, is immune to counter-party risk, and demonstrates the potential for upside appreciation.

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