{"id":27726,"date":"2017-11-08T06:58:56","date_gmt":"2017-11-08T11:58:56","guid":{"rendered":"http:\/\/olduvai.ca\/?p=27726"},"modified":"2017-11-08T06:58:56","modified_gmt":"2017-11-08T11:58:56","slug":"700-years-of-data-suggests-the-reversal-in-rates-will-be-rapid","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=27726","title":{"rendered":"700 Years Of Data Suggests The Reversal In Rates Will Be Rapid"},"content":{"rendered":"

700 Years Of Data Suggests The Reversal In Rates Will Be Rapid<\/a><\/h3>\n
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Have we been lulled into a false sense of security about the future path of rates by ZIRP\/NIRP policies? <\/strong><\/em>Central banks\u2019 misguided efforts to engineer inflation have undoubtedly been woefully feeble, so far. As the Federal Reserve \u201cvaliantly\u201d raises short rates, markets ignore its dot plot and yield curves continue to flatten. And thanks to Larry Summers, the term \u201csecular stagnation\u201d has entered the lexicon.\u00a0 While it sure doesn’t feel like it, could rates suddenly take off to the upside?<\/em><\/strong><\/p>\n

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A guest post on the Bank of England\u2019s staff blog, \u201cBank Underground\u201d, answers the question with an unequivocal yes. Harvard University\u2019s visiting scholar at the Bank, Paul Schmelzing, normally focuses on 20th century financial history. In his guest post (see here<\/a>), he analyses real interest rates stretching back a further 600 years to 1311. Schmelzing describes his methodology as follows.<\/p>\n

We trace the use of the dominant risk-free asset over time, starting with sovereign rates in the Italian city states in the 14th and 15th centuries, later switching to long-term rates in Spain, followed by the Province of Holland, since 1703 the UK, subsequently Germany, and finally the US.<\/p><\/blockquote>\n

Schmelzing calculates the 700-year average real rate at 4.78% and the average for the last two hundred years at 2.6%. As he notes \u201cthe current environment remains severely depressed\u201d, no kidding. Looking back over seven centuries certainly provides plenty of context for our current situation, where rates have been trending downwards since the early 1980s. According to Schmelzing, we are in the ninth \u201creal rate depression\u201d since 1311 as shown in his chart below. We count more than nine, but let\u2019s not be picky.<\/p>\n

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…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

700 Years Of Data Suggests The Reversal In Rates Will Be Rapid Have we been lulled into a false sense of security about the future path of rates by ZIRP\/NIRP policies? Central banks\u2019 misguided efforts to engineer inflation have undoubtedly been woefully feeble, so far. As the Federal Reserve \u201cvaliantly\u201d raises short rates, markets ignore […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[56,124,303,426,1154,431,1389,3650,4318,1939],"class_list":["post-27726","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-england","tag-central-banks","tag-fed","tag-inflation","tag-interest-rate-policy","tag-interest-rates","tag-nirp","tag-us-federal-reserve","tag-zerohedge","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27726","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=27726"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27726\/revisions"}],"predecessor-version":[{"id":27727,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27726\/revisions\/27727"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=27726"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=27726"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=27726"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}