Barry Ritholtz posted this excellent chart (figure 1) earlier that shows US interest rates going back to 1790. As you can see, we’ve had a long history of low rates. In essence, this has been a 220 year bull market! Unfortunately, the recent blip in rates from the 1970’s oil price shock has many of us thinking like gold fish – in the VERY near-term.
The brief interest rate spike that the hyperinflationists constantly point to is not a cyclical occurrence. You’ll often see this chart (figure 2) which implies that rates have come down from a great “bond bull market” therefore they are about to go right back up and the bull market in bonds will end and we will all lose our life’s savings in the bond markets. But a long-term perspective (figure 1) shows that this is simply not true. The bond market has been in a 220 year bull market. Despite the myth that bond markets have recently become cyclical the long-term evidence shows this to be entirely false.