Fortune Article - What if Interest Rates Stay Low for Years?

Fortune Article - What if Interest Rates Stay Low for Years?

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The mainstream press is finally starting to discuss something I've been exploring for the past couple of months - what if interest rates aren't going up as almost everyone expects?

Fortune published an article on March 15 entitled - What if interest rates don't rise? The article discusses the possibility that rates may stay low for years and then compares the US situation to Japan.

"Even if it doesn't come to that, Japan's lost decades show that low-rate policies are far from foolproof. Japanese 10-year notes recently yielded 1.35% and haven't been above 2.15% in more than a decade, Simons noted."

In February I took a look at Japan's interest rate history in the face of mounting public debt (Could Interest Rates Stay Low Despite Growing US Debt - Look at Japan). Japanese interest rates have come down over the past twenty years even as public debt has surged to over 120% of GDP. By comparison, US debt as a share of GDP is currently around 80%.

Yet, despite this rising debt, "Japan’s experience shows that “printing money” doesn’t always lead to an inevitable increase in interest rates. Ten-year US Treasuries at 3.7%, savings accounts at 1.5%, and 30-year mortgages at 5% could be the new norm instead of a low-point before rates quickly bounce back up."

Are we in a new low-rate environment or will rates go up? Is this recovery for real are we in a Japanese style deflationary environment? 

The answers will determine the direction of interest rates and whether a 5-year CD paying 3.3% APY is currently a good place to park money? If you believe rates are going to rise, then it's not. If you think rates might stay low for at least the next five years then it might be the best you'll be able to do.

Compare 5-year CD rates here.

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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