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Interest Rates - 12/24/15

This year, there has been a considerable amount of discussion regarding interest rates.  The presumption among many is that interest rates were surprisingly low for much of twenty fifteen, but that that could change in twenty sixteen. 

Indeed, interest rates have been low for quite some time and there is a conventional wisdom suggesting that they will eventually return to normal levels.  Perhaps -- but as pointed out by writer Neil Irwin, it may take a long time for interest rates to snap back to their pre two thousand and eight levels.  Very low rates have often persisted for decade after decade during earlier periods of American economic history. 

For instance, the interest rate of a ten-year Treasury note was below four percent every year from eighteen seventy six to nineteen nineteen.  Such a state of affairs prevailed yet again from nineteen twenty four to nineteen fifty eight.  Great Britain represents an even better example.  Long term rates in Britain were below four percent for nearly a century from eighteen twenty to the onset of World War one. 

The real aberration appears to be the high interest rate period that lasted from nineteen seventy to two thousand and seven, a period during which the yield on the U.S. Treasury averaged more than seven percent.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.