{"id":50912,"date":"2020-02-03T07:53:51","date_gmt":"2020-02-03T12:53:51","guid":{"rendered":"https:\/\/olduvai.ca\/?p=50912"},"modified":"2020-02-03T07:53:53","modified_gmt":"2020-02-03T12:53:53","slug":"hitting-zero-700-years-of-declining-global-real-interest-rates","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=50912","title":{"rendered":"Hitting Zero: 700 Years of Declining Global Real Interest Rates"},"content":{"rendered":"\n

Hitting Zero: 700 Years of Declining Global Real Interest Rates<\/a><\/h3>\n\n\n\n

Are negative interests here to stay?<\/p>\n\n\n\n

\"<span<\/figure>\n\n\n\n

A recent study by Yale economist Paul Schmelzing suggests that global real interest rates \u201ccould soon enter permanently negative territory.\u201d<\/p>\n\n\n\n

In Mesopotamia<\/a> around the third millennium B.C. there were two types of money circulating: barley and silver. The interest rate on a barley loan was usually 33%, whereas, on silver, it was 20%. At the time of writing, the interest rate where I live (the Netherlands) on my savings account\u2014technically a loan to the bank\u2014is zero percent. And my country is no exception. An enormous difference compared to the earliest economy we have written evidence of\u2014that of the Sumerians living in Mesopotamia 4,500 years ago.<\/p>\n\n\n\n

Schmelzing\u2019s study, titled Eight centuries of global real interest rates, R-G, and the \u2018suprasecular\u2019 decline, 1311-2018<\/em><\/a>, illustrates the historical decline in not only nominal interest rates, but also real interest rates. According to Schmelzing, there is a seven-hundred-year declining trend in real rates, which is not likely to reverse course.<\/p>\n\n\n\n

In one of my previous articles<\/a> I showed the (current) correlation between long-term real interest rates on sovereign bonds and the price of gold. I wrote:<\/p>\n\n\n\n

One of the key drivers \u2026 for the US dollar gold price is real interest rates. It is thought that when interest rates on long-term sovereign bonds, minus inflation, are falling, it becomes more attractive to own gold as it is a less risky asset than sovereign bonds (gold has no counterparty risk).<\/p><\/blockquote>\n\n\n\n

\"\"\/<\/a><\/figure>\n\n\n\n

Regarding this correlation, it\u2019s valuable to get a sense of where real rates are heading.<\/p>\n\n\n\n

Schmelzing points out real rates have declined (depending on the type of debt) by 0.006-0.016 % per year since 1311. Remarkably, he states, \u201cthat across successive monetary and fiscal regimes, and a variety of asset classes, real interest rates\u201d have been falling.<\/p>\n\n\n\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

Hitting Zero: 700 Years of Declining Global Real Interest Rates Are negative interests here to stay? A recent study by Yale economist Paul Schmelzing suggests that global real interest rates \u201ccould soon enter permanently negative territory.\u201d In Mesopotamia around the third millennium B.C. there were two types of money circulating: barley and silver. The interest rate on […]<\/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":[431,27826,558,27827],"class_list":["post-50912","post","type-post","status-publish","format-standard","hentry","category-economics","tag-interest-rates","tag-jan-nieuwenhuijs","tag-negative-interest-rates","tag-voima"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/50912","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=50912"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/50912\/revisions"}],"predecessor-version":[{"id":50913,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/50912\/revisions\/50913"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=50912"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=50912"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=50912"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}