In Sidney Homer’s classic “The History of Interest Rates” he said, “It seems fair to say that free market long-term rates of interest for any industrial nation, properly charged, provide a sort of fever chart of the economic and political health of that nation.”
The infographic from VisualCapitalist.com suggests either the world is in a lot better shape than people think or we should re-examine the natural rate of interest rather than the highly manipulated rate structures imposed on the market by central bank interventions. These well-intentioned interventions might solve short term liquidity crises that result from boom and bust cycles, but invariably ends in epic bubbles bursting requiring massive liqudisity injection by the central banks (most importantly the Fed).
History might well look back at efforts to control the global economy with such interventions in the same way the medical profession views bloodletting as an effective protocol. However well-intended these interventions might seem in the short run supplying desperately needed liquidity into the bank system during a financial crisis, the long-term effects and the incredible distortions might prove to be the undoing of the global financial system in the long run even keeping in mind John Maynard Keynes’s comment about how we are all dead in the long run. But surely there must be a better way to stabilize the global financial system. Does anybody have any new good ideas?
