An observation from Greg Ip in yesterday's Wall Street Journal.
In the late 1990s, the real rate [of interest] was between 3% and 4%. Today, it is about 1.7%.
And a potential explanation:
...if lenders are confident inflation will be stable, they demand less of a premium for lending money for long periods. Brian Sack, senior economist at Macroeconomic Advisers and a former Fed staffer, says "The inflation-risk premium has fallen... considerably over the past two decades as inflation has declined and become more stable."...
Under this view, low rates for the long run are good news...
Ah, but there is always another hand.
But there is a darker interpretation: That low yields suggest prospects for profits on investment are skimpy everywhere, including on stocks.
To be be perfectly truthful, I'm in the latter camp. But, a real business-cycle guy at heart, this comment strikes a chord:
Perhaps these are all temporary factors.
Yes, I think they are.