Times have radically changed. Interest rates in any given market, at any given time, are the result of the interaction of all the forces operating through the supply of, and the demand for, loan-funds. In the past, the expectation that price levels will chronically increase injected an “inflation premium” into long-term rates. The supply side was more important, since it literally established the minimum for long-term rates.

No longer. Today, intertemporally, we have negative and artificially compacted “real” rates of interest (nominal less inflation). However, interest rates may respond to influences other than inflation rates, either current or expected (as now, an overriding demand side factor, gov’t deficit financing / credit-debt pyramid, is operating in the loan funds market as well as supply side factors (gross available savings, public & foreign, as well as debt monetization by our Central Bank). Notwithstanding, that King $ is dethroned / cheapened, and its subsidy as a safe haven destination, is removed.

And the constant rollover of short-term compounded debt vs. longer maturity debt, exacerbates the expectation theory of the term structure of interest rates (“the weighted average of short-termed interest rates expected over the maturity of the credit contract”).

http://danielamerman.com/va/Compound.html

Charges on all debt, public and private sectors, are related to a cumulative figures; and since the multiplier effects of debt expansion on income, the ingredient from which the charges must inevitably be paid, is a non-cumulative figure, it is inevitably that a mathematical time will arrive when further debt expansion is no longer a practical or possible expedient, either to provide full employment or to keep debt charges with tolerable limits.

This time will arrive sooner, as structurally deficient aggregate demand will progressively decay (the policy production of a chronic condition of “sagging investment & buoyant savings”), incomes will thereby drag and decay, and debt loads will trigger more defaults (a debt-contractionary spiral). Flatteners (because money is safe), will then potentially become steepeners (as risk and liquidity premiums will increase), i.e., as amortization schedules suddenly become more skewed (triggering a “balloon payment”).

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