As shown, there have been two previous periods in history that have had the necessary ingredients to support rising interest rates. The first was at the turn of the previous century as the country became more accessible via railroads and automobiles, production ramped up for World War I and America began the shift from an agricultural to industrial economy.
The second period occurred post-World War II as America became the “last man standing” as France, England, Russia, Germany, Poland, Japan and others were left devastated. It was here that America found its strongest run of economic growth in history as the “boys of war” returned home to start rebuilding the countries that they had just destroyed. But that was just the start of it as innovations leaped forward as all eyes turned toward the moon.
Today, the U.S. is no longer the manufacturing epicenter of the world. Labor and capital flows to the lowest cost providers so that inflation is effectively exported from the U.S. and deflation can be imported. Technology and productivity gains ultimately suppress labor and wage growth rates over time and debt continues to usurp capital from productive investments and savings. The chart below shows this dynamic change which begins in 1980. A surge in consumer debt was the offset between lower rates of economic growth and incomes in order to maintain the “American lifestyle.”
Lance Roberts and his Real Investment Advice blog are excellent.
Information not being shared on mainstream media, but crucial none-the-less!
Read the entire post HERE.
So what can we expect over the next 3 decades of low interest rates?
We can look back across the Pacific to Japan for a good idea.
Japan crashed the year I started in the financial services industry.
And now thirty years later, interest rates are NEGATIVE in Japan.
Have a look at the effect this had on the value of the Japanese currency (Yen) vs. gold.
What happened in 2004?
Population stopped growing and started falling.
Money supply grew to fund government deficits.