The Price of Money - 700 Years of Falling, Can Interest Rates Keep Rising?
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 25 October 2023
⏱️ 28 minutes
🔗️ Recording | iTunes | RSS
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Summary
Interest rates have been sliding for seven centuries. Dive into the historical forces driving this trend and examine whether the recent interest rate spike is just a blip on the radar.
Topics covered include:
- How the supply of savings and the demand to borrow impact interest rates
- Why have interest rates been falling for over 700 years, and what might have changed recently to propel rates higher
- How lower rates have helped households increase their net worth and reduce their financial vulnerability
- What are some lower-risk ways to take advantage of higher interest rates
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Show Notes
Secular stagnation is not over by Olivier Blanchard—Peterson Institute for International Economics
A big problem looming for bond markets by TOMASZ WIELADEK—The Financial Times
Eight centuries of global real interest rates - Paul Schmelzing - Bank of England
Changes in U.S. Family Finances from 2019 to 2022—The Federal Reserve
A Complete Guide to Investing in I Bonds and TIPS
Related Episodes
448: Where Are Interest Rates Headed Next? Insights from the Jackson Hole Symposium
450: How Higher Interest Rates Alter Our Financial Blueprint
452: Beyond Stocks: The Allure and Strategy of Credit Investments
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Transcript
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| 0:00.0 | Walking the money for the rest of us, this is a personal financial show on money, how |
| 0:05.1 | it works, how to invest it, and how to live without worrying about it. |
| 0:09.6 | Hermia Hose, David Stein, today is episode 453, it's titled The Price of Money, Why Interest |
| 0:15.9 | Rates Are Unlikely To Stay This High. |
| 0:19.8 | Earlier this week, the 10-year nominal treasury bond yield exceeded 5 percent for the first |
| 0:26.5 | time since 2007, 16 years ago. |
| 0:30.0 | 10-year real yields are approaching 2.5 percent, also the highest level since 2007. |
| 0:37.7 | Interest on 30-year mortgages in the US are near 8 percent, the highest since the year |
| 0:43.5 | 2000. |
| 0:44.5 | That is shocking, given that two years ago, the interest rate on 30-year fixed mortgages |
| 0:50.0 | was less than 3 percent. |
| 0:52.4 | An interest rate is the price we pay to borrow money. |
| 0:56.7 | What's more normal? |
| 0:57.7 | A 3 percent 30-year fixed rate mortgage or an 8 percent 30-year fixed rate mortgage. |
| 1:04.1 | Most of the homes we've owned have had 30-year fixed rate mortgages between 6 and 8 percent. |
| 1:09.8 | But two years ago, in 2021, we took out a mortgage for the first time in over a decade in |
| 1:15.0 | order to help fund our home remodel. |
| 1:17.7 | We were motivated to do so because we were able to lock in a rate of 3 percent. |
| 1:24.0 | In the past few months, we've explored different aspects of interest rates. |
| 1:29.3 | We looked at insights from the Kansas City Federal Reserve's annual symposium that was |
| 1:34.8 | in episode 448 and looked at what was driving interest rates and what these economists and |
| 1:40.6 | central bankers thought. |
... |
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