My new book is out! In the book, How Low Interest Rates Change the World, I argue that forty years of declining interest rates from 1980 to 2020 fundamentally reshaped the world, and I speculate on what may lie ahead.
The story behind the book
In 2020, I submitted the manuscript for From Main Street to Wall Street, my book exploring the relationship between the economy and stock markets (link).
Shortly afterwards, I began considering my next long-term project. Having written about the stock market, it felt natural to focus on the bond market—or more specifically, interest rates.
At the time, as you remember, interest rates were at historically low levels, even being negative in some countries. However, what truly piqued my curiosity was not just the low rates themselves, but the remarkable, uninterrupted decline in interest rates that had persisted for four decades, from 1980 to 2020, as Figure 1 depicts. Interest rates just kept falling, falling, and falling again.
Until they rose after the pandemic.
Figure 1. Yields on long-term government bonds, 1980-2023. Average across 17 advanced economies. Data source: FRED Database of St. Louis Fed.
I found myself wondering:
- Why did interest rates decline so persistently for so long?
- Why did they reach, or come close to, negative territory in several countries?
- What were the consequences of this unprecedented fall in interest rates?
When I began writing the book, I thought, this will be it—a book about the decline in interest rates from 1980 to 2020 and its consequences. I assumed there was little need to discuss thoroughly the outlook, as in 2020, most people believed we were destined for permanently low interest rates. The phrase ‘low for long’ was broadly adapted.
But then came the pandemic, followed by a surge in inflation and an unexpected spike in interest rates, as also appearing from Figure 1. Suddenly, people began asking, have we entered a ‘high for long’ era?
As a result, I had to expand the book to explore why interest rates, after falling steadily for forty years, suddenly rose again and, even more interesting, what will happen now. This added a year or so to the project—but it also made it far more fun and rewarding. Now, the book not only examines the extraordinary decline in interest rates from 1980 to 2020 and its consequences but also considers whether interest rates will return to pre-pandemic lows or remain permanently higher than before the pandemic.
The book
The description of the book on its webpage goes as follows – Oxford University Press.
“How Low Interest Rates Change the World explores the societal impact of changing interest rates.
Taking its starting point in the remarkable four-decade decline in global interest rates from 1980 to 2020, the book examines five global trends it caused, the underlying factors that drove interest rates lower, and emerging trends likely to shape the future path of interest rates.
The book contends that the steady decline in interest rates around the world from 1980 to 2020 played a pivotal role in shaping five significant global trends during the same period: soaring debt levels, escalating housing prices, surging stock markets, widening economic inequality, and increased financial risk-taking.
The book also explores emerging factors likely to shape the future trajectory of interest rates. While demographic trends may keep rates low, other forces, such as rising public debt, can push them higher. The book offers its perspective on the interaction of these opposing trends, and presents its view on the future evolution of interest rates.
How Low Interest Rates Change the World is a no-nonsense fact-based book written in plain language. A key feature of the book is its empirical approach and reliance on data. Figures and tables richly illustrate and support the arguments presented, thereby inviting a broad audience to follow its fascinating journey into the evolution of interest rates and their impact.”
Writing style and readership
The book is written in a style like that of this blog.
This means that while the book is academic in nature, it should be accessible to a broad audience. Without relying on complex formulas or equations, the book delves into academic theories and empirical facts in a way that helps readers better understand the impact of interest rates on important societal outcomes.
A key feature of the book is its empirical approach and reliance on data. Figures and tables richly illustrate and support the arguments and theories presented, making it a fact-based book. With a long-term perspective, the book analyses data that spans many decades, often centuries. It builds its arguments by presenting stylized facts and relating them to relevant theories and academic literature, enabling readers to grasp the context behind the key points.
A typical reader is someone who regularly follows the Financial Times, The Wall Street Journal, The Economist, or similar publications—or Rangvid’s Blog :-)—indicating a strong interest in economic developments and their societal impacts.
Access to the book
The book is published by Oxford University Press. It is available from your preferred bookstore, including:
- Amazon: How Low Interest Rates Change the World: Global Trends Caused by Low Rates and Emerging Factors Shaping the Future of Rates – Amazon.co.uk.
- Oxford University Press: How Low Interest Rates Change the World – Oxford University Press.
Oxford University Press pricing means that the printed edition comes at a premium. However, purchasing a copy also helps support that students and the like can access the book for free, as anyone with access to a library that subscribes to Oxford Academic can download the book at no cost here: Oxford Academic. So, if the book’s price is a barrier, I hope you will take advantage of the free version available through Oxford Academic as an alternative.
Additionally, Oxford Academic provides free access to the abstracts of all chapters, allowing you to explore descriptions of each chapter of the book.
Organisation
The book is structured into four parts:
- Part I. Falling rates.
- Part II. Consequences of falling and low interest rates.
- Part III. What caused a four-decade fall in interest rates?
- Part IV. What does the future hold?
In my next blog posts, I’ll share a sneak peek into each part of the book. Stay tuned!
