Will interest rates ever rise again

padington

mystic_trev wrote: »

So, the whole world can binge on cheap Interest rates, almost indefinitely, with no downside?

No, I foresee a grim divided future, because of the gap between the rich and poor will cause violent social unrest without good corrective taxation but given the fluidity of global capital this will be very tricky to implement leading eventually to war between shiny futuristic new worlds plagued by terrorism and war torn desert lands run by tyrants.

Capitalism 1.0 will eat itself. 2.0 will begin when nation states are superseded by a larger 'common wealth'.

cells

Generali wrote: »

In a free market for specie money with no central bank intervention, the relative demand for saving and borrowing will set the interest rate. The amount of credit in the system, assuming that the country isn't in a recession or similar, will be set by the rules on bank reserves.

bank rules and regs don't apply to a lot of the credit. can you estimate it?

gov bonds ~£1.5T in the uk
Corporate debt ~I dont know £Trillion in the UK
MBS paper
other paper

and even loans from person to person

cells

mystic_trev wrote: »

So, the whole world can binge on cheap Interest rates, almost indefinitely, with no downside?

the credit isnt being used to fund consumption its being used to build infrastructure and primarily homes

the world is undergoing a construction boom like none seen before in history

something like 50 million residential buildings are constructed each year now

Generali

cells wrote: »

bank rules and regs don't apply to a lot of the credit. can you estimate it?

gov bonds ~£1.5T in the uk
Corporate debt ~I dont know £Trillion in the UK
MBS paper
other paper

and even loans from person to person

All debt?

AFAIK there is no way to know how much has been lent privately by one individual to another.

Govvies, corporate debt (ex-private debt), commercial paper, mortgages and consumer credit are all relatively easy to get figures for.

Counting MBS, CDOs etc is double counting because all it is doing is selling on existing debt.

The other large chunk of debt that AFAIK is unknowable is trade receivables. The company I work for has receivables equivalent to about 6 weeks net profit (~£80mn) which is nuts and we're not even that bad at collecting on invoices.

Then there is stuff like accrued tax liabilities which haven't yet come due (e.g. VAT on sales during the quarter), dividends which have been announced but not yet paid. Oh, and not forgetting last week's pocket money which I haven't given to the Generalissimos yet.

Lots of debt. Much of it accounted for but not really captured in any systematic way that I am aware of.