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Money Is So Cheap, Has the World Gone Crazy?

Money Is So Cheap, Has the World Gone Crazy?
Credits : ~Lauren
Money is so cheap these days. It’s visible to every saver who wonders what is the point of savings if the bank provides 0.1% of interest at the end of year. But despite these depressingly low rates, these remain some of the best in the world.

Everybody’s doing it

When I bought a house last year, I was able to lock in a 3.6% fixed rate for 30 years. These days, it has gone down to 2.8% according to LendingTree and houses have never been so affordable.

Car loans have reached a new highs this month, for higher amounts and longer terms. Companies like Apple, with plenty of cash, are borrowing money to buy-back their shares.

Money is so cheap, everyone is taking advantage of it.

But still, the cost of money in the US remains relatively high compared to other advanced economies.

Very low (to no) interest

On my recent 3-week vacation to Europe, which gave me a glimpse of what Early Retirement looks like, I learned that people have been buying houses last year on 15 year loans with mortgage rates of about 2%.

I started to dig into rates available across the globe, for different terms and what I found what stunning. Some countries borrow at negative rates and banks have been thinking of charging their customers’ deposit to pass the rate through. Others have found investors who agreed to lend money for 100-year terms.

In all cases, the gap with the rates in the US is huge. Where are our rates going?

Because a picture is worth a thousand words (and because I wanted to try Canva), I’ve summarized this in the infographic. Let me know what you think :)Rates across the world

The US Central bank wants to increase the interest rates further this year. To me, this looks like a tough proposition.

If the rates indeed increase, the gap with the rest of the developed economies will grow, the interest for the dollar will rise and the currency will appreciate. Global companies will yet again blame their lackluster results on the strong dollar.

If the rates cannot be increased, there is then a chance that they will be pulled to the bottom by the rest of the world economy and we would soon be able to buy houses with 2% interest rates.


Readers, where do you think the interest rates are going? Do you think there is a chance the Fed will actually increase them or are we headed towards 0 like Europe and Japan? Wouldn’t it be nice to have 30-year mortgages at 2%?

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  1. The Fed has been so standoff-ish on raising rates, I can’t imagine them going up any time soon. Even if they decide to raise them, the internet jabber is that it would be around 0.25% or something “small” like that . I say small, but then looking at the infographic you put together (nice job on that) I think, WTF, why are our rates so high comparatively?!
    That’s probably why I wasn’t an Econ or Finance major though, because that’s about as far as I get into figuring out why. :)

    • Sometimes, I even wonder if the Fed is really trying to raise the rates. Apart from actually going with a 0.25% increase last december, everything else has been little more than speeches.
      I don’t know why the rates in the US are still higher than in Europe, but after what happened with the UK today, the US 10-year bonds dropped 10%. The Fed probably doesn’t like it, but it looks like we’re getting closer to those european and japanese rates.
      Finance and Economics would have been a fun field of studies, except that back then I was more into engineering. Maybe I could study financial engineering, I’m sure there’s plenty of opportunities these days :D

    • The only thing I’d venture to predict is that we’ll have a ton of news on the topic for the next few months.
      I read yesterday that Boris Johnson was backtracking on some of the Leave campaign promises (like NHS funding & immigration control). This is all so confusing looking at it from here, how are people reacting to this locally?

  2. This cheap money is great if you have ideas of living abroad. My wife and I have already made inquiries to potentially buying a place. The key is to not leverage yourself too much.

    • I think you’re right that real-estate can be a good investment with money so cheap. For the right price.
      Do you see opportunities to buy abroad, in which area ?

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