20 Nov 2020
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
Real interest rates globally have been falling for 700 years according to research from the Bank of England.
The data shows that real interest rates have decreased by an average 0.016% per year since the 14th century to the record low today.
Global debt however, which is the sum of consumer, corporate, and government debt has risen to a record high of US$258 trillion or 331% of World GDP as at first quarter of 2020.
But wait, the US$258 trillion in global debt is forecast to rise further as a result of Government fiscal stimulus and falling tax revenues.
This quantum of debt will need to be dealt with eventually but in the interim it is a reason for why interest rates are expected to remain low for an extended period of time.
A rising interest rates now would just result in economic destruction globally and asset prices to collapse.
Click for chart.
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