Odd Lots Why the Price of Money Surged in the Last Six Years
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Oct 9, 2025 
Tom Orlik, Chief Economist at Bloomberg Economics, and Jamie Rush, Director of Global Economics, dive deep into the intricacies of the natural rate of interest. They discuss how factors like deglobalization and fiscal policies have driven the cost of borrowing higher since 2019. The duo explains the significance of R-star and its impact on investment and saving behaviors. Moreover, they explore the influence of AI on interest rates and asset prices, alongside geopolitical shifts affecting foreign demand for Treasuries. Their insights shed light on the evolving economic landscape.
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Shift From Excess Saving To More Investment
- The neutral rate (r-star) is the price of money set by saving and investment balance.
- A shift from excess saving to more investment since the pandemic has pushed r-star up.
Driver-Based Estimation Of R‑Star
- R-star can be estimated from drivers: saving supply and investment demand.
- Bloomberg's model links demographics, government debt, productivity and tech to r-star over 50 years.
Government Dis‑Saving As Primary Driver
- Government dis-saving (higher deficits) is the largest single upward force on r-star in their model.
- Political fragmentation and big future outlays (defense, green, health) reduce global saving.
