Interest Rates

/Interest Rates

A Bubble in Search of a Pin – The Unintended Consequences of Low Interest Rates

October 25th, 2016|

World’s Central Banks Lowered Interest Rates

In response to the Great Recession of 2008, The Federal Reserve and other central banks of the world artificially lowered interest rates. Their thinking was that lower interest rates would spur economic growth.

So the Fed has left rates near zero for about eight years.  The Japanese and European central banks have gone even further by introducing negative interest rates as a means of stimulating their respective economies.  So how have they done?  Have they successfully promoted economic growth?  Unfortunately no.  After eight years of ultra-low interest rates the world economy is teetering on recession.

But the Fed believes its policies have worked, that without their strong intervention the Great Recession would have been far worse.  Other respected economists believe otherwise.  They believe The Federal Reserve policies of interest rate repression and quantitative easing have thwarted the normal recovery process.  I generally agree with their opinion but that’s not the point of this article.

Regardless of who’s right and who’s wrong there are several unintended consequences.  So let me first begin by identifying the winners and losers resulting from the decisions made by the world’s central banks.  And then let’s look at potentially the most egregious unintended consequence of low interest rates which is still looming on the horizon. (more…)

  • treasury rates question mark

Why U.S. Treasury Rates Will Continue to Decline

June 24th, 2016|

Over the past couple of years I have gone out on a limb and stated unequivocally that U.S treasury rates will not rise any time soon.  While all the pundits keep predicting that The Federal Reserve Chair Janet Yellin will raise the federal funds rate, I’ve consistently said whatever action she takes is relatively unimportant to five and ten year treasury rates.

Past Comments

Shown below are a few examples of what I’ve said: (more…)

  • Why Interest Rates in Europe Are Negative

Why Interest Rates in Europe Are Negative And Will It Happen Here?

May 16th, 2015|

According to the Wall Street Journal, 16 percent of all outstanding government bonds on a global basis carry negative yields. For example, German two-year government bonds are yielding a -0.21 percent. If an investor purchased $10,000 of these bonds, they would receive $9,958 back in two years. (more…)

  • treasury rates question mark

How Will The Currency Wars Affect Interest Rates This Year?

March 21st, 2015|

As a commercial mortgage broker I’m often asked my opinion about interest rates. “What do you see them doing over the next year,” they ask? For the sake of full disclosure, my track record for accurately predicting what interest rates will do six months to a year out is dismal. (more…)

3.5 Reasons Why Interest Rates Are Plummeting

February 11th, 2015|

steadily fallenFor those of you who’ve recently returned from a year on a deserted island with no news of what’s been going on I want to let you know that interest rates have fallen precipitously (pretty much everyone else knows this but few know why, which is the reason I’m writing this article). (more…)

John Mitchell: Why Aren’t Interest Rates Rising?

May 16th, 2014|

Dr. John Mitchell presented his most recent economic forecast at the May 7th Commercial Association of Brokers quarterly breakfast meeting. Dr. Mitchell is the classic definition of an oxymoron which is defined as a sentence composed of two seemingly self-contradictory statements. In this example, Dr. Mitchell is both a well respected economist and he is entertaining to listen to. How is that possible?

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Quantitative Easing: End of an Era, Or is It?

July 1st, 2013|

A couple of weeks ago Fed Chairman Ben Bernanke hinted that the Fed’s bond buying program known as quantitative easing would begin tapering down in 2013 and, assuming that the economic indicators were still positive, that the program would come to an end in 2014. We all know what happened next: the stock market plunged, precious metals prices were crushed, other commodities, such as oil and gas prices tanked and bond yields soared as the 10-year treasury notes increased by 50 basis points in the space of a week. This all occurred because Bernanke obliquely suggested a possible change in this Fed program. (more…)

Japan – A Bug In Search of a Windshield

June 14th, 2013|

Why should commercial real estate professionals in the Pacific Northwest be concerned about what’s going on in Japan? 

Answer: Because the Japanese are determined to share their economic problems with the rest of the world.  In the years ahead, Japan’s economic problems will adversely impact both our economy and our investments.  How U.S. leaders respond will determine how much fallout there will be from Japan’s risky economic strategy.   

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Quantitative Easing: End of an Era, Or is It?

December 2nd, 2012|

A couple of weeks ago Fed Chairman Ben Bernanke hinted that the Fed’s bond buying program known as quantitative easing would begin tapering down in 2013 and, assuming that the economic indicators were still positive, that the program would come to an end in 2014. We all know what happened next: the stock market plunged, precious metals prices were crushed, other commodities, such as oil and gas prices tanked and bond yields soared as the 10-year treasury notes increased by 50 basis points in the space of a week. This all occurred because Bernanke obliquely suggested a possible change in this Fed program. (more…)

Why Inflation Is Just Around the Corner

August 14th, 2012|

Thirty years have passed since we’ve had a significant bout of inflation in this country.  At the peak of this inflation battle my money market account earned 21 percent interest!  That was the good side of inflation.  The bad side of inflation was banks pretty much stopped lending and the only lending getting done was seller financed or other creative forms of hard money lending.
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