Minor Issues Longer, Higher for Longer
Dec 13, 2025
Mark Thornton explores interest as a vital price in capitalism that influences investments and productivity. He warns of a trend reversal driven by larger state debts and aging populations, which might lead to long-term higher interest rates. The podcast highlights the implications of keeping low-rate mortgages, along with expectations for weak long-bond returns and less robust equity performance. Thornton suggests that commodities, like gold, may perform better as investors respond to these looming changes in the economic landscape.
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Interest Coordinates Time And Investment
- Interest coordinates time, investment, and economic growth by transmitting resources across time rather than space.
- Low interest encourages investment and higher wages while high interest makes future-oriented activity harder.
Fed Runs Interest As An Administered Price
- The Federal Reserve now administers interest as a managed price across many markets and instruments.
- Heavy intervention weakens feedback information about how policy actions actually affect the economy.
Historic Swing In Long-Term Rates
- Post-WWII long-term rates fell with growth, then rose in the 1960s–1981 due to fiscal and monetary expansion.
- Volcker-era high rates tamed inflation and set the stage for decades of falling nominal bond yields.