Ever since I took Economics 101 some 42 years ago, I have understood that “interest”, in the financial sense, was the price you paid for the use of someone else’s money. If you had money, and someone else wanted it, you could charge “interest” and in time, you would get back what you loaned to them. If you needed money, and someone else had some, you agreed to pay “interest” for the use of that money.

I also learned about supply and demand. If there was little demand, and a lot of supply, the price of the item in question remained low. On the other hand, if the supply was small, but the demand for it was high, then the price increased to the point where there was a balance.

What troubles me is that if you listen to our politicians and business news pundits and people on the street, you get the impression that economically, the world is coming to an end. It’s the end of the world as we know it, government has run amock and its time to make it go away, I’m being taxed and regulated to death so let’s make sure taxes and regulations are done away with or else the world will come to an end.

But here’s the problem. Long term interest rates are low in historical terms and there seems to be no pressure for them to rise. If the world were really coming to an end, wouldn’t long term rates be higher to account for the risk inherent in an end of the world scenario? I have to conclude there is a ton of money just sitting out there somewhere (large supply), and/or there is no demand (small need for it). What am I missing?

If I don’t believe the world is coming to an end, and I decide I’m willing to pay a higher price for the use of your money going forward, why will you still not lend it to me? Life never moves in a straight line. There are always up and downs, typically ups followed by downs and then again by ups. What we are really doing now across the country and the world, is getting ready for a new up. Believe me, there is one coming and you need to be ready.