And we've already explored that the bond markets are expressing that, by asing for higher and higher interest rates from Greece these are the long term interest rates in Greece.

So what will happen when central banks start raising interest rates? In 1994, rising short term rates caused increases in long term rates and declines in long term bond prices that were at least double what standard models at the time were predicting.

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

Either way, a rise in long term interest rates is liable to choke off the recovery.

Or, if these deficits are monetized, high inflation may force up long term interest rates and again choke off economic recovery.

Gradually, with lenders becoming increasingly confident in subsequent years that low inflation was here to stay, real long term interest rates began heading south.

It may have had something to do with the near total lack of response of long term interest rates to monetary tightening.

Long term policy plans

Hence, real long term rates remained quite high in the mid 1980 s.

Given today s exceptionally low long term interest rates, the annual cost would be, well, peanuts.

QE2, in which the Fed bought long term government bonds, did not have a discernible effect on long term government interest rates.

First, while the US Federal Reserve continued hiking short term interest rates, long terms rates did not increase in tandem, which allowed housing prices to continue rising.

It also lowered long term interest rates in the US and made monetary conditions there more expansionary.

Here, monetary authorities must be vigilant, and continue their non standard interventions managing both short term and long term interest rates.

They fail to build long term markets and long term opportunities, the crux of business success.

Hamas is playing a long game.

Planning for Long Term Urban Sustainability

Moreover, there may be a financial panic large financial institutions with short term liabilities and long term assets will have a difficult time weathering a large rise in long term dollar denominated interest rates. This mismatch can cause financial stress and bankruptcy just as easily as banks local currency assets and dollar liabilities caused stress and bankruptcy in the Mexican and East Asian crises of the 1990 s and in the Argentinean crisis of this decade.

Investors are buying long term bonds at the current low interest rates because the interest rate on short term investments is now close to zero. In other words, buyers are getting an additional 2 current yield in exchange for assuming the risk of holding long term bonds.

Yet financial markets are not pricing dollar depreciation and a rise in long term US interest rates accordingly.

In short, we simply shouldn t read too much into the decline in real long term interest rates over the last 20 years.

If interest rates were lowered beyond a certain point, the dollar would come under renewed pressure and long term bonds would actually go up in yield.

Most importantly, they have to be long term, since reconstruction itself is a long term process.

Remarkably, as short term interest rates rose, medium and long term interest rates did not, something that was referred to as a conundrum.

The Fed is engaged in the difficult task of trying to set not just the short term interest rate, but longer term rates as well.

But we've put a long life battery backup on here.

If central banks are tightening and long term rates aren t rising, one needs some explanation.

Investors are buying long term bonds at the current low interest rates because the interest rate on short term investments is now close to zero.

The resulting increase in real long term interest rates will reduce all forms of interest sensitive spending, adding further to the economy s weakness.

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.

A great puzzle in today s world economy is the continued low level of long term real interest rates in the United States.

Alternatively, low interest rates could push her (or her pension fund) to buy risky long maturity bonds.

One oft heard justification for high asset prices is that real (inflation adjusted) long term interest rates are very low.

A disorderly rush to the exit could lead to a dollar collapse, a spike in long term interest rates, and a severe double dip recession.

The traditional signals provided by inflation expectations, long term interest rates, and exchange rates have not started flashing.

And the prospect of rising short term rates means that investors no longer need to hold long term bonds to achieve a higher return over the next several years.

A Long Term Plan for Syria s Refugees

Its economic reconstruction remains a long term and arduous task.

Within a couple years, interest rates on long term US Treasury notes could easily rise 3 4 , with interest rates on other governments paper rising as much, or more.

Nevertheless, there is some concern that growing inflationary expectations might result in rising long term interest rates, offsetting the benefits of the stimulus.

Ordinarily, rapid global growth translates into high long term interest rates that is, unless, deep down, people have become nervous.

It also notes with concern the rise in long term unemployment and the large share of young people below 25 among the unemployed.

But this history means that the true real long term interest rate was not as high in the 1980 s as our measures show, because long term inflation expectations must have been much higher than the one year inflation rate was at the time.

Short term interest rates, most macroeconomists would say, could always be set low enough to generate reasonable rates of employment and demand.

The low interest rate on long term Treasury bonds has also boosted demand for other long term assets that promise higher yields, including equities, farm land, high yield corporate bonds, gold, and real estate. When interest rates rise, the prices of those assets will fall as well.