Low interest rates forever...

dennisk007 wrote: »

If I could guarantee you interest rates below 2% for the next 40 years, is there any financial transaction that you could make, that would benefit you financially?

Yes, I could take the money that you have guaranteed to me that I'll be able to get for 2% or less, and lend the money on to someone at greater than 2%.

Or I could invest in income producing assets which grow in value over time with the economy, such as shares of businesses, or perhaps residential or commercial property. As such ventures carry some investment risk, the reward for taking such risk is usually greater than a couple of percent a year over the long term (which you are willing to guarantee to me) and so over 40 years I would be likely to make money, even though a low interest environment might be likely to have low or negative growth characteristics.

Maybe I misunderstand the point of your question: "is there any financial transaction that you could make, that would benefit you financially?". There are all sorts of financial transactions that I can and do make, that benefit me financially. If you are willing to guarantee me low interest rates for multiple decades, then OK, thanks, but that doesn't change most of the financial transactions I currently make which already benefit me financially. Do you mean what new financial transactions might I undertake?

Are you guaranteeing that you will lend me money for 40 years at 2% or less? Or are you guaranteeing that bank savings and lending rates for the next 40 years will be 2% or less? In the latter case I might place a substantial bet on interest rates with a bookmaker, who generally wouldn't expect that situation to occur, so I would get big odds. If it failed I could pursue you for your guarantee. However there is some significant risk that you wouldn't be able to pay me out for your promised 'guarantee' when you were proven wrong, so hopefully you are willing to escrow a large sum of money with my solicitor so that it's not to tricky to get you to compensate me for my consequential losses in the event that you are dead or bankrupt in 4 decades time.