Global Interest Rates in Developed Countries

Subject: Finance
Pages: 2
Words: 445
Reading time:
2 min

Global interest rates will remain low in developed countries this year. There is a high chance that the global interest rates will remain low due to a savings superfluity. The logic behind this supposition is that developing nations such as China are saving more money than they require. Consequently, the surplus savings are channeled to developed countries such as the U.S., thus reducing the cost of borrowing. Additionally, following the Great Depression that ensued between 2008 and 2009, most American households have stepped up their saving rates. Establishments have also been taken to stash lots of cash. The central banks, particularly the U.S. Federal Reserve, have swamped the fiscal systems with liquidity, which has reduced the interest rates. Therefore, it appears that the overabundance of savings has gone global, thereby leading to low-interest rates.

The interest rates will remain low due to the law of demand and supply. The willingness to loan money exceeds the desire to borrow money. Families in countries that encountered huge housing arrests suffered huge debts, which left a long-lasting impression on the dangers of borrowing. Additionally, European firms are disinclined to borrow to invest due to the ambiguity regarding the status of the euro as well as the outstanding arrears of nations such as Greece. The declining populations of developed countries and the ensuing reduction in domestic markets discourage the growth of enterprises hence borrowing.

Establishments in the U.S. are discouraged from investing due to uncertainties regarding the export markets. The same trend has spread to developing countries such as China. Additionally, the recent series of technological interruptions complicate companies’ capacity to plan ahead. Huge investments require huge gambles, which cannot be made due to the lack of knowledge of viable bets. The consequences of these interferences include a decline in overall productivity. Nevertheless, the long-standing tendencies in the form of decreasing worldwide population growth and constant technological interference indicate a long period marked by low-interest rates.

Demographics also play a vital role in the dropping of interest rates. Conventionally, young people tend to spend much by investing in their future while the middle-aged save more than they need. On the other hand, the elderly have a tendency to deplete their savings. Alterations in the number of the aging population have shifted the subtle balance between savers and borrowers, which peaked around 2010 in the northern parts of America. The actual reasons for the reduced interest rates are byzantine than previously thought. These reasons imply that going back to ostensibly normal interest rates is unlikely for a long time to come.