Where Interest Rates Are Going

Simple answer: gradually lower.

What? Now this doesn’t seem right.  The Fed is getting ready to raise rates, right?

Yes, and the Fed has been getting ready for a few years now.  And the Fed doesn’t control the real free market interest rates.

Private Lenders don’t borrow money from the Fed and re-lend it to real business borrowers.  Private Party Lenders lend their real savings to the real borrowers. They lend based on the free market – mostly.

They are influenced by overall economic conditions, and those conditions are generally easy money, a money market awash in cheap Fed cash, looking, hunting, gnawing, scratching, and thrashing around for a place to go.

The Fed’s unprecedented historic pushing cheap money into banks and buying all of the bank loans they can gorge on has altered the financial environment – sort of a financial parallel to global warming.

So, even when they do raise rates someday, the economy still has to digest the gluttony of past.  It will take several years.  Meanwhile there’s a lot of money seeking higher yield.  Your money, your friends’ money, your enemy’s money, all money.  Competition lowers prices and that’s what’s happened.

We have a whole new generation of private party Lenders offering up their savings that would have been in Treasury’s, CD’s, bonds, mutual funds, stocks, — except they have been earning measily rates and/or been too volatile to cope with.

If this wasn’t all enough, the world is out that the Fed may be forced to go to -hold your breath – negative rates!  What does that mean?

Bottom line: free market rates are gradually down.

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