A new report from McKinsey is predicting higher global interest rates, relative to inflation for the foreseeable future. In a nut shell it is forecasting a rise in global investment while global savings fall, as China saves less and consumes more, and as the ageing population in the developed world eat into their savings. This will be the complete opposite of what we have seen since the mid 1970s when savings growth outpaced investment growth. As a consequence, the global economy will see faster growth, but indebted countries, banks, and households will lose out. Default is likely to follow, and in the West, house prices will look more precarious than ever.

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