Why Money Itself Is Getting More Expensive
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- Опубликовано: 16 май 2024
- When central banks like the US Federal Reserve make an interest rate decision, they’re reacting to a bundle of domestic and external factors. Those factors used to push down on borrowing costs. Now, after decades of cheap money, they are pushing up. It’s a massive change.
Bloomberg Economics crunched 50 years of data to show why interest rates are likely to stay high, and what it means for everything from house prices to the stock market and your pension.
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Chapters:
00:00 Introduction
00:42 What the price of money means
2:00 The natural rate of interest
2:46 Why money was cheap
4:40 A new high-interest rate regime
6:37 Winners and losers
#money #inflation #bloomberg
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I would like more time spent on graphs rather than random clips from the 60s and 70s
A perfect educational material. Simplified but not oversmplified. Short but not too short, and the conclusion is very clear.
All those random clips from 70s made it more complicated than just showing graphs
There are several reasons why high borrowing costs are likely to remain in place for the foreseeable future:
Central bank policies: Central banks play a crucial role in determining interest rates. In response to economic conditions, central banks may choose to keep rates low or increase them. In recent years, many central banks have kept rates low in an attempt to stimulate economic growth following the global financial crisis. However, as the global economy recovers and inflation picks up, central banks may start to raise interest rates to control inflation. Higher interest rates lead to increased borrowing costs for businesses and individuals.
Government debt levels: Many governments around the world have accumulated high levels of debt in response to fiscal stimulus measures. High levels of government debt tend to push up borrowing costs as investors demand higher returns for the perceived increased risk. As governments continue to grapple with high debt levels, borrowing costs are likely to remain elevated.
Market volatility: Uncertainty and volatility in financial markets can lead to higher borrowing costs. Investors become more risk-averse during periods of market turmoil and may demand higher interest rates to compensate for the perceived higher risk. Factors such as geopolitical tensions, trade disputes, or economic recessions can contribute to market volatility and higher borrowing costs.
Inflation expectations: Inflation erodes the purchasing power of money over time. If individuals and businesses expect higher inflation in the future, they may demand higher interest rates to protect against the erosion of returns. Central banks may also raise interest rates to curb inflationary pressures. As inflation expectations rise, borrowing costs are likely to increase.
Increased regulation: Since the global financial crisis, regulators around the world have introduced stricter lending standards and regulations to prevent another crisis. While these measures aim to enhance financial stability, they can also lead to higher borrowing costs for businesses and individuals. Increased compliance costs and capital requirements for lenders can translate into higher interest rates for borrowers.
Borrowing costs are higher than they have been but they're not what can historically be called high
The music is too loud
1:10 fundamentl forces shape where the price of money settles.
2:10 FED sets the borrowing costs well below the natural rate
with money too cheap, there would be too much investment and not enough saving. overheating economy and rising inflation.
2:30 the economy would be cool, causing unemployment.
the natural rates help balance the maximum employment
3:00 it was around 5% for 10-year bonds
3:15 capture the main drivers:
4:00 it invested in US government bonds or IOUs
5:20 long-term interest rates could settle somewhere between 4.5 - 5 %
5:55 if AI and other technologies live up to the hype
6:10 all of these forces combined
7:55 cheap credit to expensive one
Yes, but you forgot to add the wages to the equation. Wages have not matched inflation and people are forced to use more borrowing power while forcing a shrinkage in savings. There is more credit card and student loan debt than ever before.
While inequity is a cause for concern for the coming years, this video's topic is not on wages.
@narikhamster1343 well it should be. Wages directly affects America's spending habits and lead to inflation/deflation periods and events. This also affects the velocity of money which can lead to stagflation. If wages were to out pace inflation the spending would increase the demand for debt would dropped and therefore dew to the law of supply and demand, debt would be cheaper by far.
The video is not talking about wages... it will need seperated video to discuss that matter...
Just so you know that real wages is not a simple thing to discuss, especially with deteriorating of USA infrastructure and the significantly low manufacturer cost in China... USA is already becoming not competitive in global trade, and wages is surely complicate the matter
@pradanal.m.r.8276 I don't agree...just the simple statement of "wages have been out paced by inflation for x numbers of years has added to the growth of debt" would have been fine. There was no mention of wages reflecting the use of debt anywhere in the video.
It amazes me that we fabricated a system to help bartering and we've managed to make it so complex that no one can fully undestand it. We are brilliant fools
Wow, the animation was superb. Great job Bloomberg and Crisscross
BEAUTIFULLY DONE!! top marks for the team that produced this...more more more, this is Bloomberg for the next generation
Outstanding visuals, writing, and edit. Bravo, guys. One of the best so far.
Excellent, short, to the point, factual and well presented I Give you an A!
Beautifully produced and presented ❤
Since when was accelerating technological development and increased productivity inflationary? We have alwasy heard that those are deflationary forces. Great choice of music for the video btw - I loved the audio track playing with this.
Thanks Bloomberg, this was a highly nutritious and juicy video.
Insightful analysis on borrowing costs! This video delves into the reasons behind the persistence of high borrowing costs, offering valuable perspectives for investors and financial enthusiasts. #EconomicInsights
The animation is awesomeeeee
Not true.
Interest rates will be going down massively this year and next.
AI is also extremely deflationary.
Loving this: hope the next generation checks this out!! spreading the word!
As simple as Demand & Supply, but in a complex interactive economic ecosystem.
This is so well done 🔥🔥
Is there a written article too? Could someone find the link?
Living within my means, not falling for that money pit trap called buying a home, living with room mates to keep costs down, cook your own food instead of going out most of the time, wear the same clothes for years, even with holes in it. My luxuries are Internet, Deodorant, Toothpaste, bath soap and detergent. Two can play at this game.
Very good eight and a quarter minutes of content
Overall, a combination of factors such as central bank policies, government debt levels, market volatility, inflation expectations, and increased regulation contribute to the persistence of high borrowing costs. While these factors may fluctuate over time, it is likely that borrowing costs will remain elevated in the long term.
What’s the song in the background of the section starting at 42s? I dig it.
what bout the hoarding super wealthy, lowering wages?
Very informative 😊
would love to see the same analysis for Europe/Eurozone!!!!
Same as US but slower and worse in every way hahaha
@@JordanDurzi Major economies had stopped buying US debt (tbills), so i beg to differ. That's why the situation of Europe becomes complex and interesting at the same time.
Aging demographics and xenophobia will ruin Europe. The UK will remain strong because British youth are pro-immigration while European youth are anti-immigration. @@Rupeshkumar-qy7hf
Emerging markets are the next driver of growth due to dollar and Euro stagnation
Very good vídeo.
such educational videos need to be a weekly series!
Brainwashing videos🤨
this video is way overanimated for this topic, it makes it harder to focus on the actual content
The wealthy also create jobs. They don't owe you anything
Loved the visuals
This is the best content Bloomberg has ever created. 🤗
Animation is beautiful
It’s funny how countries like Angola always had high interest rates (more than 30%). And we are still not used to it
Angola has 30% interest rate because some years they can get inflation of 100%…..30% is even low in a place where you can have 40% inflation within one month just by governments bad decisions
What do you think will happen the next time there's a crisis?? Rates will go near 0. Everyone knows this
beautiful data visualization graphics
too loud music compared to voice, hard to hear :( :( :( :(
I heard just fine
of course no word on the super rich getting richer and the economic balance getting out of whack. the super rich are a big problem.
Great explanation!
Model was kind of kept silent. Could be more transparent
Hi
Too optimistic forecast, i think
"Borrowing costs are back to the NORM"
Lol which baby boomers prepared to retire between ages of 35 and 45??? WS traders???
Very very stylish!)
❤❤❤
I read a book from Peter Zeihan about how interest rates will be higher due to demographics as well as the breakdown of global trade due to insecure trade routes. Both he said would create a breakdown of the economy. Many thought he was alarmist then but is being proven right by this video as well as Houthi Red Sea attacks which prove his thesis on the vulnerability of global trade.
Given the battle for the 9 lines with the Chinese trade route yeah that would be right, hence the whole Taiwan issue, if China gets Taiwan then they get the 9 lines complete and control one of the most important areas of sea travel for goods and cargo giving China a massive grasp over global trade movement along with how much of the global debt they have bought.
Zeihan has been talking about demographics since the mid 2010s. People were too arrogant and stupid to acknowledge it then.
Incorrect though. This would totally be true if the money supply was fixed or constant. But it is not, the reason the fed drove interest rates up is because of inflation. We had inflation because we had too much money chasing too few productive places to put that money. The video is saying that money is going to get a lot more productive. If that is true then the fed will increase the money supply to meet that demand.
Not really. Money isn't more productive if it's not put into value added activities, right? How much value does asset bubbles have to society as a whole? Not a lot, if one measures value by the distribution of wealth across the income distribution. Only a increasingly smaller amount of people are directly or indirectly benefitting from focusing on asset accumulation. Distribution matters too. And that's a dangerous tendency to pursue.
Neoliberalism favoured assets over income. Consequently, we have economic, political, and social fragility increasing across developed nations who bought into the Neoliberal framework. So, the cost of money will have to go up, and the debt farming under Financial Globalisation will have shrink, or there will be a price to pay in social cohesion and political upheaval. The People want the expectations they have been given by society and markets to be fulfilled, and they are increasing disgruntled with economic apartheid and precarity.
The idea thst more money printing is the way to go is insanity. Rather, it is time to deflate markets where zombie firms can exist without being productive, and to inhibit Stockholder Primacy with its accompanying executive share price manipulation, and return to a more orthodox financial system. The perverse motivations that are puffing up asset bubbles, and starving the truly productive economy have to removed. The free ride given to capital has created externalities that could permanently put life on this planet at risk. It's a time to stop and think.
The information itself is too vague and I don't like the substance of this documentary because it's a whole lot of nothing and unrealistic speculation but the I like the high tempo and the constant videos and animation.
Whoever did the graphics should get a raise these were very well done
Jeez....annoying and LOUD background music. Not worth the effort.
skizzo editing
Too much distractive animations ... over done!
Animations are way too distracting. Kept losing focus what the narrator was talking about. I eventually lost interest in the video 2 minutes in ...
Interest rate should decrease
This is bunch of Keynesian garbage.
what about it is keynesian?
Useless video.