https://www.theepochtimes.com/how-the-end-of-negative-interest-rates-affects-your-life_4951597.htmlHow the End of Negative Interest Rates Affects Your Lifeby Jeffrey A. Tucker
Dec. 29, 2022
Most people under the age of 40 have no financial experience in a world of positive interest rates for most dates of maturity. Maybe that sounds geeky and like it doesn’t matter much. It’s actually a huge thing.
The financial situation that emerged after 2008—the Fed chairman from back then got a Nobel Prize recently for creating disaster—affected not only finance but culture and morals, not only of the United States but the whole world.
In the last 60 days, everything has begun to change, thanks to the current Federal Reserve chairman’s attempt to avert an inflationary disaster. He began to raise rates once he realized that he had been trolled during the pandemic to delay his intention to patch up the Fed’s balance sheet and get the country back on the path to normalcy. His campaign began in earnest in the fall of 2020, when he commenced the steepest increases in lending rates in Fed history.
We are just now seeing the fruits of this work. The 10-year interest rate as adjusted for inflation has just crossed back into a territory of positivity that we have not seen since 2007. During the intervening years, everything became very distorted. That is now being rectified with huge implications for our lives and culture.
Let’s think about it this way. Generations over hundreds and thousands of years have been acculturated to believe that good things come to those who wait. Sacrifice some now and you earn greater rewards later. Study hard for the exam and you get an A. Study hard for all exams and you graduate with honors. Graduate with honors and you have a better chance of getting a good-paying job.
So on it goes with the whole of life. The more you defer your consumption and indulgence in the here and now, and think about the future, the better off you will be. That presumption is naturally built into the financial system. The yield curve in normal times provides a higher payout in the future than it does in the present. It teaches us to defer consumption, forgoing whatever joy there is in the present, in favor of great reward down the line.
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