Since the onset of the Global Financial Crisis in 2008, the hallmark of policy making has been the hope that lowering interest rates will lead to recovery in spending. The cuts in interest rates have been accompanied by other incremental measures. One reason for such insistence on interest rates is invariably their non-controversial nature. Ardent fiscal hawks prefer that to other forms of stimulus. But, the world economy has reached a point where we have doubt the utility of these rate cuts as an attempt to stoke recovery.
Sometime back we had put up a third party chart that showed that the US bond yields were at their lowest in more than a 100 years. The fact that low interest rates have not helped is again reinforced by the US 30 year mortgage rates. It reached around 3% recently. The chart below points to the secular downtrend in the mortgage rates for the last more than 30 years. The fall since 2008 has been particular steep. A day may not be far when banks and governments plead (and pay) borrowers may not be far off.
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