{"id":935821,"date":"2018-08-17T21:48:45","date_gmt":"2018-08-17T21:48:45","guid":{"rendered":"http:\/\/juniorminingnews.com\/?p=935821"},"modified":"2018-08-17T21:48:45","modified_gmt":"2018-08-17T21:48:45","slug":"interest-rates-and-civilization-3","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=935821","title":{"rendered":"Interest Rates and Civilization"},"content":{"rendered":"

By Brian Maher<\/a><\/span> <\/p>\n

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This post Interest Rates and Civilization<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

We have it on superb authority \u2014 the Institute of International Finance \u2014 that the world is presently $247 trillion in debt.<\/p>\n

That figure, dear reader, represents a record high.<\/p>\n

Global debt has surged $9 trillion since Jan. 1 alone\u2026 and $30 trillion since the close of 2016.<\/p>\n

Were you aware that global debt is rising nearly three times the rate of global wealth?<\/p>\n

Meantime, global interest rates remain near record lows \u2014 despite recent nods in the other direction.<\/p>\n

Never in history has debt scaled such heights\u2026 never have interest rates plumbed such depths.<\/p>\n

Each fact is remarkable in itself. But taken together?<\/p>\n

Today we connect the dots\u2026 see how they all tuck together\u2026 and tease out the implications.<\/p>\n

Richard Sylla professes economics at New York University.<\/p>\n

He is also co-author of A History of Interest Rates <\/i>(available through Amazon at a bargain-bin $63 per).<\/p>\n

This book canvasses 5,000 years of interest rates\u2026 from ancient Babylonia to the glories of Greece and Rome\u2026 the Renaissance, the age of empires\u2026 all the way through to the 21st century.<\/p>\n

Each historical epoch is distinct.<\/p>\n

The investigator hunting meaningful comparisons between eras can be easily thrown off the scent\u2026 and end down a blind alley.<\/p>\n

Yet despite the false leads and dead ends, Sylla believes he’s penetrated the mysteries of interest rate cycles throughout history:<\/p>\n

\u201cIt seems like there is a U-shaped cycle for each civilization.\u201d<\/p>\n

Beginning at the top left of the \u201cU,\u201d interest rates begin a downward cycle.<\/p>\n

Critically, Sylla’s research shows that as interest rates fall\u2026 civilizations rise.<\/p>\n

Civilizations crest as interest rates near the bottom of the \u201cU.\u201d<\/p>\n

These civilizational heights bring heroic deeds\u2026 great achievements\u2026 and golden ages.<\/p>\n

Sylla claims this pattern was visible with Babylon, Greece, Rome.<\/p>\n

In each case, Sylla observes \u201ca progressive decline in interest rates as the nation or culture developed and throve.\u201d<\/p>\n

Near the turn of the 20th century, famous Austrian economist Eugen von B\u00f6hm-Bawerk glimpsed the same phenomenon. Writes Sylla:<\/p>\n

B\u00f6hm-Bawerk declared that the cultural level of a nation is mirrored by its rate of interest: The higher a people’s intelligence and moral strength, the lower the rate of interest.<\/i><\/p>\n

(Caveat: We speak here of market interest rates \u2014 before central banking in its current form.)<\/p>\n

But eventually the gods grow anxious of man’s advancing knowledge\u2026 his increasing achievements\u2026 his ascent up Olympus.<\/p>\n

They know the solution\u2026<\/p>\n

The gods begin to tinker with man’s interest rates.<\/p>\n

Rates start rising off the bottom of the \u201cU,\u201d up the right side of the slope.<\/p>\n

The burden of accumulated debt rises with them.<\/p>\n

The added weight throws chains upon civilization\u2026 the flame of achievement flickers\u2026 and it finally fades.<\/p>\n

In this manner, each civilization Sylla studied \u201cdeclined and fell.\u201d<\/p>\n

The message, clear as gin:<\/p>\n

Civilization rises with falling interest rates. Fattened by debt\u2026 civilization falls with rising interest rates.<\/p>\n

Now come home\u2026<\/p>\n

The year is 2018. Interest rates have begun to rise recently \u2014 if slowly \u2014 and haltingly.<\/p>\n

They still remain at lows unseen in recorded history, besides a brief spell during the Great Depression:<\/p>\n<\/p>\n

But all cycles end\u2026 and history will not be forever put off.<\/p>\n

Rates will return to \u201cnormal\u201d one day.<\/p>\n

If rates rise meaningfully in the years to come, is civilization in for a sharp \u201cdecline and fall\u201d as befell civilizations past?<\/p>\n

Sylla thinks yes, it’s possible:<\/p>\n

We might say that our current low interest rates indicate that we’re at one of the high points of our civilization. Maybe things will get worse from now on.<\/i><\/p>\n

Recall that civilizations gorge on debt in a falling rate environment\u2026 and collapse under that debt as interest rates rise.<\/p>\n

Let us now redirect our focus to a unique form of civilization \u2014 American civilization.<\/p>\n

U.S. interest rates have been in steady decline since their 1981 peak.<\/p>\n

Meantime, the national debt has exploded:<\/p>\n

\"chart\"<\/p>\n

Today the national debt runs to $21 trillion \u2014 and counting.<\/p>\n

How will America service that debt if rates return to historically normal levels?<\/p>\n

We hadn’t the heart to run the numbers. Financial analyst Daniel Amerman did:<\/p>\n

If the interest rate on that debt were to rise by even 1%, the annual federal deficit rises by $200 billion. A 2% increase in interest rate levels would up the federal deficit by $400 billion, and if rates were 5% higher, the annual federal deficit rises by a full $1 trillion per year.<\/i><\/p>\n

Incidentally\u2026 5% higher are rates well within historical norms.<\/p>\n

If interest rates do rise to historical levels and their relationship to civilization holds true\u2026<\/p>\n

Perhaps we should all light a candle for civilization\u2026<\/p>\n

Below, Charles Hugh Smith shows you why the stability of America’s status quo is an \u201cillusion.\u201d What comes next? Read on.<\/p>\n

Regards,<\/p>\n

Brian Maher
\nManaging editor, The Daily Reckoning<\/i><\/p>\n

Editor’s note: <\/b>For now, interest rates are still extremely low and the stock market is once again flirting with record highs.<\/p>\n

Which is why we want to let you in on a secret our colleague just shared with u<\/a>s<\/b>, a secret he had been holding onto\u2026<\/p>\n

It’s about how he made his millions\u2026 and let’s just say it’s not how most people do. He says anyone can do it if only they knew how. Now he’s telling all.<\/p>\n

He trusted us not to share this one-minute clip<\/a><\/b> with too many<\/i> people, so we agreed to take it off the web Sunday at midnight.<\/b><\/p>\n

If you really want to change your financial future, take one minute to [watch this short clip].<\/a><\/b><\/p>\n

It could turn out be the most valuable minute of your life. Go here now.<\/a><\/b><\/p>\n

\n

The Stability of America’s Status Quo Is an Illusion<\/b><\/h2>\n

By Charles Hugh Smith<\/strong><\/span><\/p>\n

The stability of America’s status quo is an illusion.<\/p>\n

One of the enduring mysteries of the past decade is why inflation has remained tame while the central bank and government have pumped trillions of dollars of newly created money into the economy. Millions of words have been written about this, and so some shortcuts will have to be taken to make sense of it in one essay.<\/p>\n

Let’s start with the basics.<\/p>\n

Adding newly created money but not generating new goods and services of the same value reduces the purchasing power of existing money.<\/p>\n

To keep it simple: say …read more<\/a> <\/p>\n

From:: Daily Reckoning<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By Brian Maher This post Interest Rates and Civilization appeared first on Daily Reckoning. We have it on superb authority \u2014 the Institute of International Finance \u2014 that the world is presently $247 trillion in debt. That figure, dear reader, represents a record high. Global debt has surged $9 trillion since Jan. 1 alone\u2026 and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[366],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/935821"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=935821"}],"version-history":[{"count":0,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/935821\/revisions"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=935821"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=935821"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=935821"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}