What if Interest Rates Stay Low for the Next 70 Years?

Interest rates have been going lower for years. 

In some nations of the west, they have now reached zero percent, a situation that would have been hailed as impossible just a few years ago. 

What if interest rates were to stay low for the rest of the century? 

This is definitely a possibility.  And this is not something I just thought up today. 

My subscribers have been alerted by me to this probability for more than a decade, perhaps longer, as you will see, below. 

Interest rates have been trending down for years. The best way to show this is via the chart of bond prices. Now remember, bond prices are the inverse of yields, so in this chart, below, a rising price means interest rates going lower. The chart is of the US long bond, 1978 to current:

Rates have been trending lower since 1981. If we were to show this over the course of several hundred years, we see that actually interest rates have in the past had a tendency to move in rough 30 year waves; that means roughly 30 years of rates slowly trending higher from all time lows, then 30 years of the reverse. 

Historically, interest rates have moved in 30 year cycles, the same as the Kondratieff commodity price wave, but lagging slightly. This chart of bond price history shows us that the very high interest rates of the early 1980s (that many of us remember) were actually a historical anomaly and exceedingly unlikely to be repeated. And quite often in markets, when things do go to extreme highs, the next thing that follows is extreme lows. 

I think low interest rates could persist for years, if not decades. Here’s why… 

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