When Has Lowering Rates Ever Worked?

Throughout history, lowering rates to stimulate an economy has never worked…NEVER.

So why do governments do it?

Millennials weren’t around in 1981, but those of us who were can’t forget the skyrocketing interest rates that peaked in 1981.

Back then you could get a 10-year Treasury yielding almost 16%.

It was a no-brainer.

Buy Treasuries and collect 16% virtually risk-free.

And it was a perfect scenario for savers.

Unfortunately, it’s been downhill ever since.

Today, the 10-year is paying a whopping 1.648%.

And that’s waaayyyy up from last July when it was 0.53%, which was an All-Time-Low.

At the same time last year, the 30-year bond fell below 1.20% for the first time in history…an ALL-TIME LOW.

It’s currently paying 2.36%

The Effect of Lowering Rates

Do the math here.

If you invested $10,000 in 1981 your return would’ve been $1,600.  Today, the same investment gives you $165.

In Plain English that means you’re getting 90 percent less for your money…40 Years later.

Let that sink in for a moment.

To make matters worse, since 2008 the Federal Reserve has accelerated the destruction of savers in America by putting us on the verge of negative interest rates.

Why is this important?

There has never been a time in history when lowering interest rates have worked long-term.

Never.

The misguided idea behind lowering rates is that it will be an incentive for people to borrow money.

It hasn’t worked for the simple reason that who wants to tie up their money for 10 years for a pittance?

Instead, people will hoard their money.

Ironically (or NOT) we still have some of the highest government yields* on the planet, which is why money keeps flowing to the US.

(Note* China is now offering bonds in the 3% range)

Lowering Rates to Negative

Meanwhile, Germany’s 30-year bond is presently at MINUS -0.217%!  

Translation:  You pay them to hold your money.

The Financial Times recently reported there’s more than $15 TRILLION worth of bonds in the world right now that have negative yields!

And our current FED Chairman, Jerome Powell, wants to lower rates?

Trust me when I say, the bond bubble will do waaaayyyy more damage to the global economy than the stock market.

Don’t make the mistakes that crush most investors.

See how to position yourself for the Fed’s next move (HERE).

Remember: We’re Not Just About Finance.

https://www.financialsmatter.com/do-you-make-these-mistakes-when-investing/

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