Gold prices are extremely sensitive to global interest rate movements.

Commodity export prices are at record levels, global liquidity has been ample, and international interest rates have been low.

Interest Rates

And yet global interest rates are even lower now than they were then.

Either way, interest rates would have to fall in order for world bond markets to clear.

As real interest rates and risk premia begin to rise, the level of global trade and investment will decline.

This means that real interest rates interest rates measured in terms of goods and services have stayed the same.

The Trouble With Interest Rates

When Interest Rates Rise

The Long Mystery of Low Interest Rates

Do Low Interest Rates Ensure High Asset Prices?

World monetary conditions seem to point to a protracted period of high liquidity and low international interest rates.

But interest rates on dollar assets are given in world markets independently of what China does.

US Federal Reserve Board Chairman Ben Bernanke s notion of a global savings glut is a commonly cited explanation for falling world interest rates.

Back then, Europeans complained that low interest rates in America were driving global inflation now low US interest rates are blamed for driving irresponsible asset price booms.

Central banks respond to lowered demand by reducing interest rates and to higher expected inflation by raising interest rates.

My best guess is that when global uncertainty fades and global growth picks up, global interest rates will start to rise, too.

In this case, the price of loanable funds is the real interest rate. An expectation that interest rates will be high sometime in the next decade should mean high interest rates on long term bonds today.

Will Rising Interest Rates Torpedo Stock and House Prices?

A Good Rate Hike for Europe

How Long for Low Rates?

US Interest Rates Will Continue to Rise

When interest rates rise, the prices of those assets will fall as well.

In addition to the global dangers of the carry trade, the policy of ultra low interest rates may also be bad for Japan.

But as debts mount, and global interest rates rise, investors will become rightly nervous about the risk of debt restructuring.

An expectation that interest rates will be high sometime in the next decade should mean high interest rates on long term bonds today.

But real interest rates did not fall enough, because nominal interest rates cannot go below zero.

But the time will come when world interest rates begin to rise, as central bankers prepare to resist the upward creep of inflation.

Second, China s central bank still controls interest rates by enforcing a roughly three percentage point spread between deposit rates and lending rates.

Interest rates on government debt are still low.

Ultra low interest rates may persist for some time.

In Brazil, interest rates remain close to 11 .

Both were reluctant to lower interest rates markedly.

Bondholders gain when interest rates fall.

Italy, however, chose to squander that interest rate advantage.

This will change, however, once the economic pick up is confirmed. Interest rate hikes may be coming sooner rather than later, which is why Berlusconi and French President Jacques Chirac are talking up interest rate cuts now.

The combination of economic recovery and lower interest rates would produce a virtuous dynamic in which falling interest rates and a rising budget surplus are mutually reinforcing.

In this case, the price of loanable funds is the real interest rate.

That year, oil prices plunged, interest rates soared, and the government defaulted on its debt.

This bonanza has largely been the result of an extraordinarily positive international environment. Commodity export prices are at record levels, global liquidity has been ample, and international interest rates have been low.

If the world s central banks raise interest rates while the major problem is insufficient global demand, they might cause a depression.

Bank interest rates on savings are lower than the inflation rate and many multiples lower than the rates promised by the informal sector.

Low Japanese rates led to a search for yield by Japanese investors who increasingly invested their savings in foreign currencies, where they received higher interest rates the famous FX carry trade.

Ready for a US Rate Hike?

Only in the 1930 s were interest rates near zero.