Graph of interest rates
Interest is overrated
I don't think so at all. Of course, it isn't so sexy to watch tired-seeming federal bankers or economists from famous banks while they expound about economic interrelations. The content and statements are for me much more informative than current stock-market reports and the details of firms quarterly earnings. In the federal banks' reports various data are analysed in order to give information about contradictory tendencies in the market as a whole, to steer against negative developments and to set up predictions of the future. Interference from politics, saying that the interest rates have been adjusted too little, is always good for some politicians in their attempts at getting into the limelight. Anyone who examines these effusions in the press is wasting their time.
The weak consumption in Germany, the high proportion of savings despite low interest rates, as well as the large number of private bankruptcies due to cheap credit, are paradoxical at first sight. However, this situation reflects how problematic interest rates are: debtor or creditor, fear or euphoria, having the bailiffs round or buying a new Porsche: nothing else. People's emotions affect the graph of interest rates substantially, or vice versa. The rules were set up by people for people, why should we expect anything else!?
An important indicator for interest rates and stock market indices in Germany is the Bund Future. The Bund Future's share price development makes me thoughtful, and helps to explain the high proportion of saving by the population. Investors accept a relatively low interest rate and the risk of rising interest rates through falling share prices. The high price of gold can indirectly help to explain these fears. The worry is going around that it could all get much worse. The other side takes the cheap money and buys vast amounts of shares, real estate and consumables. The pendulum is clearly moving in this direction in the US. Debt is becoming dramatic. Here two extreme views of the market meet each other, though I think that debt is a greater threat than increasing levels of savings and slump in consumption. After the good stock market years of the last decade and the low rates, there will likely be moderately rising interest rates and the sideways movement seen since the high-water mark of the leading share prices. It will however put the brake on the debtors and cheer up the savers.
