Best of the Week
Most Popular
1.Oil Wars 2016 - US vs Russia vs Saudi Arabia vs Iran - Nadeem_Walayat
2.Crude Oil Price Crash Triggering Global Instability, Trend Forecast 2016 - Nadeem_Walayat
3.Stock Market Crash - Last Week was The 2nd and Final Warning... - Clive_Maund
4.Stock Market Crash Apocalypse or Bull Market Severe Correction? - Nadeem_Walayat
5.TShipping Said to Have Ceased… Is the Worldwide Economy Grinding to a Halt? - Jeff_Berwick
6.Crude Oil Price Crash Catastrophe, Independant Scotland Literally Begging to Rejoin the UK - Nadeem_Walayat
7.Summers: Global Economy Can't Withstand Four 2016 Fed Hikes - Bloomberg
8.Gold And Silver: New World Order: Public Be Damned, Preferably Dead - Michael_Noonan
9.Rigged U.S. Ttreasury Bond Market Double Barreled Hidden Q.E. To Infinity - Jim_Willie_CB
10.Major Stocks Bear Market Awakening - Zeal_LLC
Last 5 days
Gold, Gold Stocks, and the End Game - 12th Feb 16
Canadian Dollar Now Even Less of a Haven from US Dollar Collapse Than Before - 12th Feb 16
The Stock Market Dow Elevator; 18, 17, 16.... - 12th Feb 16
Will Harry Dent Eat Crow on His $700 Gold Price Prediction? - 12th Feb 16
Where to Hide Your Money From Reckless Governments - 12th Feb 16
The War on Cash is About to Go into Hyperdrive - 11th Feb 16
More Bankruptcy For Your Retirement Portfolio - 11th Feb 16
2016 - Gold & Silver Rising: A Gold And Silver Bottom May Be In - 11th Feb 16
Gain Trading Confidence by Improving Your Elliott Wave Analysis Skills - Video - 11th Feb 16
With A Gloomy Start To 2016, A Bust Seems Just Around The Corner - 11th Feb 16
UK Interest Rates, Economy Forecasts 2016 and 2017 - Video - 10th Feb 16
World Markets Are in Sync - 10th Feb 16
If You Miss Buying Gold – You Will Regret, it Later - 10th Feb 16
The Fed Doesn't have a Clue! - 10th Feb 16
How Far Can Gold Price Go? - 10th Feb 16
It's Stock Market Panic Time! - 9th Feb 16
Gold Stocks Picks for Patient Pickers - 9th Feb 16
Oil Price Collapse U.S. Recession Odds 2016 - 9th Feb 16
Preparing for Crisis - It's About Risk Mitigation and Capital Preservation - 9th Feb 16
Top Silver Mining CEO: Don't Laugh, We Could See Silver $100+ - 8th Feb 16
Gold, Investment Leadership Changes Permanent? - 8th Feb 16
Stock Market Panic Decline Begins... - 8th Feb 16
How to Save Money By Growing Your Own Homegrown Tomatoes Indoors From Seeds - 8th Feb 16
US Economy Slides One Step Further Towards A Recession - 8th Feb 16
Gold Bear Market Bottom : Mr. Bear has left the PM Sector for Greener Pastures - 8th Feb 16
Stock Market At Important Support - 8th Feb 16
David Cameron Humiliated in Poland Over Refusal to Stop Taking UK Benefits, BrExit or Super State? - 8th Feb 16
Why Crude Oil Prices Could Continue FALLING From Here - 7th Feb 16
Stock Market S&P, NAS Best, Most Reliable Answers Come From The Market And You - 7th Feb 16
Stocks Bear Market Continues - 7th Feb 16
Silver COT Paving Way for Sustained Upside Breakout Sharp Rally - 7th Feb 16
US Dollar Double Top, Gold Prospects Brightening Rapidly - 7th Feb 16
Gold And Silver - Is A Bottom In? Nothing Confirmed - 7th Feb 16
Gold Stocks Something has Changed - 6th Feb 16
UK Interest Rates, Economy GDP Forecasts 2016 and 2017 - 6th Feb 16
Gold Price, Mining Stocks Rocket Higher - 5th Feb 16
Crude Oil Price Bottoms and Blues - 5th Feb 16
Gold and Silver: Ripe for a Recovery! China May well Change the Game - 5th Feb 16
How Pension Plans are Responding to Financial Repression - 5th Feb 16
Senior Gold Producer Goldcorp Takes Large Stake in Nevada's Gold Standard Ventures - 5th Feb 16
Tips for Smart Oil and Natural Gas Investing 2016 - 5th Feb 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Financial Crisis 2016

Unpleasant After-Effects of Prolonged Low Interest Rates Starting to Show

Stock-Markets / Financial Markets 2013 Sep 18, 2013 - 03:34 PM GMT

By: Profit_Confidential

Stock-Markets

Michael Lombardi writes: There’s a notion among central banks of the global economy that goes like this: if you lower interest rates, you will get economic growth. On the surface, it makes sense; easy monetary policies by central banks are supposed to bring confidence to an economy—they’re supposed to encourage consumers and businesses to borrow, which should translate to more jobs created and an improvement in the standard of living.


This phenomenon of lowering interest rates to spur the economy has spread through the global economy like wild fire.

Interest rates at the central bank of Australia have been trending lower since the financial crisis. In December of 2007, the cash rate (the benchmark interest rate) there was 6.75%. Fast-forwarding to today, this rate is 2.5%. (Source: Reserve Bank of Australia web site, last accessed September 16, 2013.)

Brazil’s central bank has lowered its benchmark interest rate since the end of 2008. The interest rate dictated by the country’s central bank stood at 13.75% near the end of 2008; now it stands at nine percent. (Source: Banco Central do Brasil web site, last accessed September 16, 2013.)

The benchmark interest rate in South Africa is down almost 50%. The South African Benchmark Overnight Rate (SABOR) was above 10% near the end of 2007. Now it stands at 4.82% and has been hovering around this level for some time. (Source: South African Reserve Bank web site, last accessed September 16, 2013.)

While we’ve been watching this happen, no one is really asking the question how are interest rates being kept low? The answer: to keep the interest rates low central banks print more paper money and stay involved in their bond markets.

Since central banks in the global economy started to lower their interest rates, their money supply has gone up significantly. For example, since the last quarter of 2007 to the second quarter of 2013, Brazil’s M1 money stock (the amount of notes and coins in circulation plus timed deposits, such as checking accounts) has increased over 52%. (Source: Federal Reserve Bank of St. Louis web site, last accessed September 16, 2013.)

But in spite of all the money printing and other games being played by central banks in their effort to keep interest rates down, the global economy isn’t seeing robust growth. The International Monetary Fund (IMF) has lowered its expectation on growth in the global economy repeatedly.

Hence, despite their easy money policies, central banks are failing in their attempts to revive the global economy. But what are the long-term effects of all this newly created money? One thing that really does concern me is inflation at the global level.

While the skewed government numbers don’t show it, inflation is a problem right now. Eventually, inflation will be reflected in the government stats. And to control that inflation, higher interest rates will be required. In fact, the massive jump in the yield of the 10-year U.S. Treasury bond (from 1.84% at this time last year to 2.85% today) is warning of inflation ahead.

The 30-year downtrend in interest rates may have finally come to an end. As an investor, you need to look at your investments (and your debt) and realign your affairs accordingly to account for higher inflation and higher interest rates ahead. And you better do it now before it’s too late!

Source -http://www.profitconfidential.com/economic-analysis/unpleasant-...

Michael Lombardi, MBA for Profit Confidential

http://www.profitconfidential.com

We publish Profit Confidential daily for our Lombardi Financial customers because we believe many of those reporting today’s financial news simply don’t know what they are telling you! Reporters are trained to tell you the news—not what it can mean for you! What you read in the popular news services, be it the daily newspapers, on the internet or TV, is the news from a “reporter’s opinion.” And there’s the big difference.

With Profit Confidential you are receiving the news with the opinions, commentaries and interpretations of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate and other investments so we can tell you what we believe today’s financial news will mean for you tomorrow!

© 2013 Copyright Profit Confidential - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History