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silver surfer

300 Years Of English Interest Rates

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Here's some interesting data, 300 years of interest rates from The Bank Of England, it's chart 8 in the first document on this link,

http://www.bankofengland.co.uk/publications/Pages/other/monetary/mpreadinglistf.aspx

Basically what it shows is that what we consider ultra low interest rates are really the long term historical norm. The real exception were the double digit interest rates resulting from the 1970's oil price shocks.

Edited by silver surfer

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Here's some interesting data, 300 years of interest rates from The Bank Of England, it's chart 8 in the first document on this link,

http://www.bankofengland.co.uk/publications/Pages/other/monetary/mpreadinglistf.aspx

Basically what it shows is that what we consider ultra low interest rates are really the long term historical norm. The real exception were the double digit interest rates resulting from the 1970's oil price shocks.

Yes but there are a few other factors at play.

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Here's some interesting data, 300 years of interest rates from The Bank Of England, it's chart 8 in the first document on this link,

http://www.bankofengland.co.uk/publications/Pages/other/monetary/mpreadinglistf.aspx

Basically what it shows is that what we consider ultra low interest rates are really the long term historical norm. The real exception were the double digit interest rates resulting from the 1970's oil price shocks.

How do you square this with no. 3 in your sig?

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I'm not sure looking at nominal rates in isolation is particularly instructive, especially when the monetary regime has changed so radically. As far as I'm concerned it's real rates that matter.

For example, between 1800 and 1900 prices fell by 32% according to the ONS. Consequently a bond yielding 3% p.a. nominal over this period actually gave a real return of around 3.4% p.a.

Even though nominal yields aren't too dissimilar today, we have a central bank that is (supposedly) targeting an inflation rate of 2% p.a. – a greater than seven-fold increase in prices over 100 years.

Therefore the chances of achieving 19th century real returns at current nominal rates are extremely remote.

Chart 14 in that doc is more relevant in my view, although even with that I would hesitate to draw any conclusions.

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Echoing frozen out and freetrader the key bit of data missing is inflation.

I've read pieces on this before and the price of beer (for instance) barely changed between Elizabethan times and Victorian times, sticking at an old penny.

Whne you have near-zero inflation for decades or even centuries then your capital is not being eroded and a low nominal interest rate is fine. This has not been the case in the 20th and 21st centuries.

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Echoing frozen out and freetrader the key bit of data missing is inflation.

I've read pieces on this before and the price of beer (for instance) barely changed between Elizabethan times and Victorian times, sticking at an old penny.

Whne you have near-zero inflation for decades or even centuries then your capital is not being eroded and a low nominal interest rate is fine. This has not been the case in the 20th and 21st centuries.

that means £1 saved for your pension gives you £1 worth of goods at todays prices....Heresay...how on earth could a banker survive when there is no inflation to suck off?

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that means £1 saved for your pension gives you £1 worth of goods at todays prices....Heresay...how on earth could a banker survive when there is no inflation to suck off?

And how do you get a house price bubble and "my house is my pension" when you can be certain that the debt will be the same in real terms twenty years on.

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Echoing frozen out and freetrader the key bit of data missing is inflation.

I've read pieces on this before and the price of beer (for instance) barely changed between Elizabethan times and Victorian times, sticking at an old penny.

Whne you have near-zero inflation for decades or even centuries then your capital is not being eroded and a low nominal interest rate is fine. This has not been the case in the 20th and 21st centuries.

It has for Japan.

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But to me the chart suggests that "norm" is around 5%, so we are now well below that norm?

+1

Doesn't the chart show that interest rates are the lowest ever - although they did go very high for many years after WW2.

Of course for sure the BoE would try to claim that current rates are entirely normal but that sort of misleading claim seems to be in their DNA - along with feathering their own pension fund with inflation linked "vehicles" while having a written remit to keep inflation low.

Edited by billybong

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that means £1 saved for your pension gives you £1 worth of goods at todays prices....Heresay...how on earth could a banker survive when there is no inflation to suck off?

Not so much bankers as governments. Inflation is combination of a wealth tax default in disguise. What more could a politician ask for?

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If you just drop the data in to excel and add a trend line, the base rate starts at 4% and rises to 6%, add a 3 or 4 percent onto that for the real rate banks will charge for a mortgage

What it shows is that we had abnormally high rates from 1972 until 1992

the current abnormally low rates started in 2007, will it be 2027 before the pendulum swings again?.

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Not so much bankers as governments. Inflation is combination of a wealth tax default in disguise. What more could a politician ask for?

That's fine as long as the population are acquiring wealth to steal. The trade deficit tells me that there is not the wealth being generated so stealing wealth is making teh 99% poorer.

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