US Interest Rates Will Continue to Rise

And, due to rising consumer prices, the nominal interest rate will continue to rise.

Interest rates around the world are poised to rise.

But it will become a big problem when the economy grows and interest rates start to rise.

That is because an increase in the inflation rate causes interest rates on new debt to rise by an equal amount.

This would drive up interest rates in the US and, ultimately, could trigger the dollar s collapse.

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

But now interest rates for Italian and Spanish government bonds are on the rise again, closing in on about 6 .

That is why, after more than two years, interest rates are rising, not falling, in countries crushed by onerous austerity measures.

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

Although long term government interest rates are now very low, they are beginning to rise in response to the outlook for a sharply rising national debt.

Only when interest rates recently began to rise a bit did the government finally and promptly implement an austerity program, with the approval of all political parties.

With Treasury yields spiking and economic activity collapsing, the Fed would want to cut interest rates and flood the markets with liquidity.

A second argument is that higher oil prices are due to lower interest rates and anticipations of higher long term prices.

To be sure, all G7 central banks are worried about the temporary rise in headline inflation, and all are threatening to hike interest rates.

If interest rates on US Treasury securities were high and rising rapidly as the debt grew, I would agree with this argument.

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More sophisticated advocates warn that government spending will drive up interest rates, thus crowding out private investment.

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A shift in foreign investors portfolio preferences away from long term bonds could easily trigger such a run up in rates.

Actual appreciation would lead to actual deflation and further downward pressure on domestic interest rates.

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

Tensions are on the rise.

Irreverence starts to rise.

The moon is just rising.

In the corridors around my office, all the economists agree that this factor should have pushed US interest rates up three years ago.

They also believe that the government deficit drives up inflation and interest rates, thereby crowding out other spending by consumers and firms.

And, even Einstein saw compounding work that is interest on, interest on, interest.

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