Consequences – They are unavoidable, by Bill Blain

Artificially suppressed interest rates and low birth rates have their consequences. From Bill Blain at morningporridge.com:

“We may choose our paths, but we can’t choose the consequences that come with them.”

This morning: Consequences are unavoidable. Pension savers are crushed by interest rate repression and the changing demographics of Covid, while the deluge of debt fuelled by low rates does nothing for economic sustainability.

One of the things any investor must understand is that everything has consequences. There are always consequences. They are unavoidable. 13 years of monetary experimentation by central banks has profound consequences. For everybody.

A few days ago my colleague, Mike Hollings, CIO of Shard, and I put together a vlog on shifting market conditions. I’ve known Mike for decades, and we both agree it’s the consequences of the last 13 years of monetary distortion (since the beginning of the Global Financial Crisis that began in 2007) that present the greatest long-term challenges for markets. (You should be able to see some highlights of our chat in the latest Shard Lite-Bite video later today.)

One of the issues we covered was the effect of repressed interest rates on savings – and how challenging these will be to the expectations of current pension plans. Sure enough, bang on time, there are two stories in the market this morning that throw our concerns into stark reality.

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