I have long opined that interest rates this low would be here for a decade or so for reasons due to generational spending patterns and we are repeating much of the post Great Depression cycle. I revise my opinion that we will likely NEVER see interest rates much higher than 2% if that. The fiat currency crowd will laugh and say printing of money will invite huge inflation issues, the economy will get better crowd will say that higher demand for loans will push up rates, and of course the gold/bitcoin crowd will say proof of such inflation is the higher prices for their commodity and all commodities. Note the attached graph that points out commodities are in fact down over the last decade and if inflation was a worry they would be up. CPI inflation, which the fed wants at and above 2% is going nowhere as well. The point there is consumers led by a frugal millennial generation is saving, not spending, having been scared by two back to back recessions. Lets also note a factoid here that it has been shown that when interest rates go above 10% and below 4% consumer spending decreases with every basis point tick up or down, the sweet spot for consumer spending is between 4% and 10% and we will not see anything between those points for years or decades to come as I will explain here. What is going up are assets prices, led by bonds which go up when interest rates go down and frankly they have nowhere else to go. Therefore owning and buying bonds now approaches the greater fool theory in that you make near nothing on interest and no chance of any cap gains on bonds. The only bonds going up as noted on this chart are High Yield bonds where interest rate chasers are seeking any kind of yield. The risk, HIGH risk, in bonds is that at this level any move up destroys bond values. The real appreciation in value is the S&P 500 or stocks in general. This is due to the fact companies produce cash flow, unlike gold nor bitcoin, and can weather any cycle of interest rates and in the current environment actually gain value as much of the excess cash not being spent is going into stocks where cap appreciation is obvious and of course dividends are being paid. The S&P 500 alone pays 1.5% plus which is much higher than any savings account or CD and frankly safer since unlike savings and even bonds their cash flow protects one from inflation depreciation. As for interest rates in the future note the huge budget deficits we currently have which are being duplicated across the world. Note the demand for additional spending by the far left democrats and thus we will see trillion dollar deficits for as far as one can see. Much of the dollars being printed are being sucked up by the Fed onto their balance sheet and they, like Japan, are now buying private issue bonds. The fed soon will follow suit of Japan and begin buying stocks via ETF's. Japans central bank owns 85% of all ETF's in that country a staggering stat. The reason is the government needs to hold up asset prices for those depending on such for needs and retirement in a country where there is huge numbers retiring. Also Japan's debt is much larger than the US presently and they need to hold down interest rates to finance all that debt. One can likely see where I am headed and that is our fed is likely on that same path for the same reasons. Thus the point here is interest rates are likely this low forever due to the need to finance all that new spending coming via the democrat control of government and truthfully the Republicans are no better there. Might want to acquaint yourself with MMT, modern monetary theory, sooner rather later as that is the way of the democratic party now. So personally I have moved and will move before the Georgia election almost all I own into some ETF's, mostly S&P 500 index funds as thus putting my money where my mouth is so to speak. You might want to consider such yourself.
