We're all doomed?

One of the great, global, economic forces of our age, which I’ve bored you rigid discussing in this blog, is that it has been possible to borrow long-term money at relatively low interest rates.

For the past few years, the impact of these low long-term interest rates has been visible in a surge in borrowing by individuals and companies together with the related phenomenon of rising prices of almost every kind of asset or commodity. Here are just three important manifestations:

a) UK house prices that keep going up and up – almost regardless of what the Bank of England does to short-term interest rates;

b) share prices, that have increased more-or-less in a straight line since the spring of 2003;

c) a boom in takeovers of companies, financed by borrowing, and a great wave of repurchases of shares by companies, again funded by debt.

Now, a fall in longer term interest rates is simply the corollary of a rise in the price of certain US Government bonds.

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