{"id":57140,"date":"2021-03-17T08:48:39","date_gmt":"2021-03-17T13:48:39","guid":{"rendered":"https:\/\/olduvai.ca\/?p=57140"},"modified":"2021-03-17T20:02:38","modified_gmt":"2021-03-18T01:02:38","slug":"what-interest-rate-triggers-the-next-crisis","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=57140","title":{"rendered":"What Interest Rate Triggers The Next Crisis?"},"content":{"rendered":"<h3><a href=\"https:\/\/realinvestmentadvice.com\/what-interest-rate-triggers-the-next-crisis\/\">What Interest Rate Triggers The Next Crisis?<\/a><\/h3>\n<div class=\"content\">\n<div class=\"bialty-container\">\n<div class=\"pf-content\">\n<div class=\"paywall\">\n<ul>\n<li>The Ten-year U.S. Treasury note yields 1.61%.<\/li>\n<li>10-year high-quality corporate bonds yield 2.09%.<\/li>\n<li>The rate on a 30-year mortgage is 3.05%.<\/li>\n<\/ul>\n<p>Despite recent increases, interest rates are hovering near historic lows. \u00a0We do not use the word \u201chistoric\u201d lightly. By \u201chistoric,\u201d we refer to the lowest levels since the nation\u2019s birth in 1776.<\/p>\n<p>The graph below, courtesy of the Visual Capitalist, highlights our point.<\/p>\n<p><a href=\"https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/1-4.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-447993\" src=\"https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/1-4.jpg\" sizes=\"auto, (max-width: 1200px) 100vw, 1200px\" srcset=\"https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/1-4.jpg 1200w, https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/1-4-294x300.jpg 294w, https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/1-4-1003x1024.jpg 1003w, https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/1-4-768x784.jpg 768w\" alt=\"interest, What Interest Rate Triggers The Next Crisis?\" width=\"1200\" height=\"1225\" \/><\/a><\/p>\n<p>Despite 300-year lows in interest rates, investors are becoming anxious because they are rising. Recent history shows they should worry. A review of the past 40 years reveals sudden spikes in interest rates and financial problems go hand in hand.<\/p>\n<p>The question for all investors is how big a spike before the proverbial hits the fan again?<\/p>\n<p><strong>Debt-Driven Economy<\/strong><\/p>\n<p>Over the past 40 years, debt has increasingly driven economic growth.<\/p>\n<p>That statement on its own tells us nothing about the health of the economy. To better quantify the benefits or consequences of debt, we need to understand how it was used.<\/p>\n<p>When debt is used productively, the interest and principal are covered with higher profits and sustained economic activity. Even better, income beyond the cost of the debt makes the nation more prosperous.<\/p>\n<p>Conversely, unproductive debt may provide a one-time spark of economic activity, but it yields little to no residual income to service it going forward. Ultimately it creates an economic headwind as servicing the debt in the future replaces productive investment and or consumption.<\/p>\n<p>The graph below shows the steadily rising ratio of total outstanding debt to GDP. If debt, in aggregate, were productive, the ratio would be declining regardless of the amount of debt.<\/p>\n<p><a href=\"https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/2-9.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-447994\" src=\"https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/2-9.png\" sizes=\"auto, (max-width: 636px) 100vw, 636px\" srcset=\"https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/2-9.png 636w, https:\/\/realinvestmentadvice.com\/wp-content\/uploads\/2021\/03\/2-9-300x157.png 300w\" alt=\"interest, What Interest Rate Triggers The Next Crisis?\" width=\"636\" height=\"333\" \/><\/a><\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<p>&nbsp;<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>What Interest Rate Triggers The Next Crisis? The Ten-year U.S. Treasury note yields 1.61%. 10-year high-quality corporate bonds yield 2.09%. The rate on a 30-year mortgage is 3.05%. Despite recent increases, interest rates are hovering near historic lows. \u00a0We do not use the word \u201chistoric\u201d lightly. By \u201chistoric,\u201d we refer to the lowest levels since [&hellip;]<\/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":[195,303,312,391,431,15637,15470,3650],"class_list":["post-57140","post","type-post","status-publish","format-standard","hentry","category-economics","tag-debt","tag-fed","tag-financial-crisis","tag-growth","tag-interest-rates","tag-michael-lebowitz","tag-real-investment-advice","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/57140","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=57140"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/57140\/revisions"}],"predecessor-version":[{"id":57157,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/57140\/revisions\/57157"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=57140"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=57140"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=57140"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}