This is the best time to borrow money. In all of history according to the Washington Post

This is the best time to borrow money in recorded history.

That’s right: Interest rates are lower today than they were when FDR or Napoleon or Henry VIII or Genghis Khan or Charlemagne or Julius Caesar or Alexander the Great or even Hammurabi were around. Or, if you want to put a year on it, lower than at any time since the ancient Sumerians made the first loans, payable in either silver or grain, back in 3000 B.C.

That, at least, is what Bank of England chief economist Andy Haldane found when he went digging through the historical record. Now, it is true that rates almost got all the way down to zero during the Great Depression, but they have gotten all the way down there today. Indeed, interest rates are all-but-zero in the United States, the United Kingdom, the euro zone and, for the past 16 years now, Japan. Those are economies that, in nominal terms, make up more than half of the global economy.


What has happened now that hasn’t happened at any other time going back before Moses? Well, we not only have an aging economy that doesn’t need as much investment as before, but also a global economy that just had a global crisis. Put those together and you get zero interest rates.

That is just another way of saying that interest rates depend on what economists call loanable funds and liquidity preference. Think about it like this: Like anything else, the price of borrowing money should depend on the supply and demand of money that is ready to be lent out. But in the past 15 years, that supply has gone up, as Asian countries have started saving more, and demand has gone down, as Western countries have started investing less now that their labor forces are aging and shrinking. The result has been that interest rates have kept dropping from their already low levels.

But that’s not the full story. It turns out that the price of borrowing money is only mostly like the price of anything else. That’s because not only is there a demand for borrowing money, but also a demand for money itself. When people get scared, say, when a housing crash almost brings down the entire financial system, they don’t want to borrow money or lend money or do anything else with it. They just want to hoard money. The problem, though, is that if nobody is spending, then the economy will shrink — which will only make people want to put their money in super-safe places, like government bonds, rather than taking any kind of risk. Interest rates, in other words, will fall even more.

Now, financial crises aren’t new, but global ones are. The only other time that has happened was in the 1930s. When everyone around the world becomes risk-averse, you can’t even export your way out of trouble since there’s nobody to export to. Interest rates fall to zero and get stuck.

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