16th-Century Traders Could've Predicted Zero Rates
A Q&A with Paul Schmelzing, author of a paper that traces 800 years of borrowing costs, on central banks, inflation and the U.S.-China rivalry.
And if, perchance, inflation overshoots?
Source: Hulton Archive/Archive Photos
Critics of ultra-low interest rates keep waiting for a correction that might not come. Far from being an anomaly, near-zero borrowing costs may be the historical norm and a product of powerful forces at work for the past 800 years.
The price of money has been marching lower since the late Middle Ages, says Paul Schmelzing, a postdoctortal researcher at Yale School of Management and visiting researcher at the Bank of England, who traced this phenomenon in a paper last year. So pronounced is the long-term decline that neither wars nor monarchs — nor the arrival of central banks — have stood in the way, he reckons.