April 16, 2014
Brendan Brown writes in today’s Mises Daily:
In its just-published World Economic Outlook the IMF trumpets the view that the real level of equilibrium interest rates worldwide has declined substantially since the 1980s and is now in slightly negative territory. There is a good Irish word to describe this story: baloney.
The IMF authors (“Perspectives on Global Real Interest Rates,” April 2014) cite three factors accounting for their hypothesized decline in rates: substantially higher savings in the emerging market economies, an increased riskiness of equity relative to bonds coupled with an increased demand for safe assets, and finally, a persistent decline in investment rates in advanced economies especially since the recent global financial crisis. They are oblivious to two huge potential errors in their analysis.