198: Economic Prediction

The "Fed Funds Rate" will not exceed 1% until sometime in 2017.  That means that interest rates on money market funds and other short term accounts for savers will continue to be close to zero.  It also means that mortgage interest rates will continue to be near the lows of my lifetime, and I'm almost 64 years old.  The ocean of money that circles the globe every day will seek historically "reasonable" returns, perhaps something in the range from 5% to 15%, depending on the risk tolerance of that particular segment of the ocean.  This means that bonds, stocks and real estate will all continue to rise.  This trend has been in existence since mid 2009.  It may well continue for another five or ten years.  But it will not always be so.

This super low interest rate environment is seen as normal to the world's consumers who are in their early 30s or younger.  Eventually abnormally low interest rates will cause abnormalities, which in turn will cause economic turmoil and dislocation - in other words a recession or something worse.  Those politicians and government bureaucrats responsible for fostering the environment to create the turmoil will all be doddering and drooling oldsters or dead. 

You can thank Tim Geithner and Ben Bernanke for most of this mess.