Interest rates are low.
The typical historical range of the benchmark US 10-year treasury note has been 3% to 7% (though in 1980 it went as high as 12%). This year it has mostly been below 1%.
Instead of the usual 4% or 5%, mortgage rates are around 3%.
This is a result of expansive credit policies by the monetary authorities. Why? Because of the corona virus economic impact? Well, yes, but we’ve been in an era of expansive credit policies (“easy money”) for decades. Alan Greenspan started things going in that direction in 1999 when there was anxiety about the impact of Y2K. He stimulated the economy with more easy credit after the tech bubble burst in 2001. Then: a flood of money after the Great Financial Crisis of 2008; a deluge now with the pandemic recession.
“Hard money” economists have been voicing concern that all the easy credit and low interest rates will result in inflation. The increase in money circulating has been greater than any increases in production. More money chasing the same number of goods should result in inflation. But that has not been the case.
Consumer price inflation has been low. So where did the deluge of money go?
It went into financial assets. Prices of stocks and bonds have soared.
There has been a lot of inflation, after all. The top 10% own the bulk of the outstanding financial assets. So they ain’t complaining. The middle classes have seen their 401(k)’s increase in value. So they’re not complaining. The rest of the population doesn’t much follow the financial markets, so they’re not particularly aware.
But the process is insidious. It does devalue the currency. And it exacerbates the egregious inequality that has become a hallmark of our times.