We are currently in the lowest interest rate environment in known history, with countries in Europe and Asia experiencing negative interest rates. Low interest rates may sound great for those wanting to purchase homes or finance businesses, but sustained low rates eventually have a very negative impact on the economy. In this type of environment, since money is so cheap to borrow, excess demand for houses, and cars is created. This increased demand causes price inflation in the assets that all the cheap funds are flowing into. To compensate, real estate developers and manufacturers of automobiles continuously increase output. Eventually the market becomes oversupplied when demand cools to the ever increasing prices of those assets. This combination of factors eventually bursts the bubble created by cheap money(inexpensive to borrow). This is when those assets become difficult to sell, and prices begin to drop at a much higher pace than their ascent.
Low rates also cause prices of stocks to inflate, many of them are currently trading at levels totally unjustified by their earnings. Low rate environments allow publicly traded companies to use funds borrowed from the Federal Reserve at less than 1% to purchase their own stock, thereby creating artificial demand and increasing prices. Many assets are in bubble territory at the moment and are ready to pop. The whole world is drunk on all of this access to money printed by the most dominant economies. The excess money supply due to printing or quantitative easing will eventually cause many currencies to lose a significant amount of purchasing power, and very quickly. Venezuela is a great example, so is Zimbabwe, South Africa, and Canada and England to a lesser extent. The only assets I believe will stand and become stronger through the fire of major economic downturns, and all these exploding bubbles is physical gold and silver. Be careful, be awake, be informed.
If it hits the fan like we think...water and food will be like gold and silver as well
Thank you for the post
I agree, when the crisis deepens and we start experiencing significant price inflation food and water will be like gold and silver, lets hope we have all of these essentials in abundance by then.
We are currently in the greatest debt bubble in all of history.
The only way that our Central Banking type system can continue to exist is by the amount of debt in existence increasing every year.
Think about it. When money is borrowed there is normally an interest rate attached to the loan. That interest currency has not yet been created so the following year more debt must be issued in order for the interest to be paid back.
So each and every year the amount of debt in existence must exceed the previous year or the interest cannot be repaid leading to a default and a collapse of the system.
It will continue to go on, until it's suddenly impossible to continue.
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