Global Real Interest Rates – Chart Updates 27/4/11
The updated global real interest rate charts:
[EDIT: For up-to-date real interest rate charts see here.]
[EDIT 2: You can now buy the data behind the main chart below.]
Long-term & Short-term Real Fed Funds Rate:
The declining trend in the real fed funds rate continued in march. The charts of the real fed funds rate have shown sharp declines in recent months. We should note that gold has been on a tear higher in recent months also – this corroborates the usual thesis that ‘negative real rates are positive for the gold price’.
With the exception of Australia (only updated until Dec 10) and Norway, real interest rates in the developed world are negative and declining. As has been mentioned in previous updates, this does not bode well for business conditions in the west. A generally increasing money supply is positive for business conditions (as businesses typically own things and owe money). Such negative and falling real interest rates have the tendency to unwind the fractional-reserve banking pyramid and cause declines in the stocks of ‘IOU money‘. This can be extremely negative for general business conditions and can drive money to better shores.
Real interest rates in China, India and Korea remain negative. As mentioned here, this is fairly bearish for Asian markets.
Although not quite as bad, real interest rates in Eastern Europe are generally negative and falling.
In contrast, real rates in Latin America are positive and rising. The implication is that the tendencies for an unwinding fractional-reserve banking system are limited. Relative to the west and other parts of the emerging world, Latin American countries could do well.
Middle East & Africa:
Real interest rates in Israel and Turkey display clearly bearish dynamics. Real rates in South Africa are pointed down but not at dangerous levels yet.
Recommended: Charting the Federal Reserve's Assets - 1915 to 2012