The global economy has benefited from an extended period of historically low interest rates that fueled home buying, corporate mergers and wealth around the world. But rates are on the rise and the era appears to be ending.
To me this is a fundamental question for the future of the economy. As more baby boomers retire and start pulling their money out of the market, it seems like the liquidity bubble could burst. I'm going to publish an article on this shortly.
Submitted: Jun 20, 2007
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Pilm
(Unregistered)
A big source of liquidity in the US comes from foreign investors and governments sinking money in treasuries, corporate stocks and bonds, and US banks. This has held up so far in the downturn, but you have to wonder whether these investors and governments will be able to continue tossing money to the US as their own wealth situation deteriorates, and as foreign governments direct money toward supporting their own banks and economies. Makes me think there is a reasonable chance that interest rates will rise significantly in the next year. Time will tell, but I certainly wouldn't put any money in a CD longer than 1 year at this point.
Posted: Mar 7, 2009