Is Low Interest Rates the New Normal? : Four Questions

Is Low Interest Rates the New Normal? : Four Questions """We are currently living through the longest, extended period of historically low interest rates in recent memory! While there are numerous reasons for this, it may be advantageous to better understand the fundamentals, as well as the relationships/ramifications/impacts, of such a prolonged, extended period. However, because we have never seen anything like this before, our concepts are based on theories, concepts, and obvious common sense. Will interest rates remain this low and become the New - Normal, or will we see cycles once more? With that in mind, this article will attempt to consider, examine, review, and discuss four questions, as well as whether they will have unfavorable long-term consequences.

1. Historic lows - How low will interest rates go? : Many people thought we had the lowest rates in a year or two, only to find out they went even lower! Despite the fact that these are historic lows, how low will they go? We observe mortgage interest rates that have never been lower in recent memory, as well as the consequences. In housing, it means that a buyer can get more house for his money because it creates low monthly payments, and so on. Individuals can also qualify for larger loans because their monthly expenses are a lower percentage of their overall income, etc. When banks pay such low interest rates and bonds pay such low dividends, it contributes significantly to the rising stock market for a variety of reasons, including the fact that it is the only game in town! Banks and lenders, on the other hand, make large profits because they continue to charge high interest rates on credit cards and other unsecured consumer loans! It benefits car dealers because lease rates, but also car loans, become more appealing!

2. Do interest rates fluctuate historically? Will they do so again? : A review of historical trends shows that interest rates fluctuate over time. Since they appear to have done so in the past, will this happen again, and if so, when? Will the current period be prolonged or reduced because the United States' budget deficit is also at an all-time high?

3. The relationship between rates and stocks: When interest rates are low, using bank vehicles, bonds, bills, and so on, becomes less appealing, largely because they may not even keep up with inflation, especially in the long run! As a result, the stock market typically benefits because many people borrow cheap money and invest it in stocks, and it also becomes the only game in town!

4. If this trend continues, what new/future incentives will the Federal Reserve employ? stimulus: Lower interest rates have historically been used by the Federal Reserve to stimulate investment and/or spending. What weapons will be available if this becomes the new normal?

Will this become the New Normal, or merely a cyclical occurrence? The best strategy is to understand the consequences and be prepared!"""