Bloomberg：高利率是结构性新常态

Traders are putting the odds of a rate hike at the next meeting of the Federal Reserve at about 90%. That's after a hot CPI print that came out on Friday. That's right. And Fed chair Kevin Walsh is still under pressure from the man who gave him his job, president Trump, to get his fellow policymakers to lower rates. But Tom O'Rlethwait, the chief economist for Bloomberg Economics, argues the world has changed. He writes, quote, cheap money cannot be delivered by changing who runs the Fed.

Tom O'Rlethwait joins us now. Alright, Tom. Since we have you, what is the conventional wisdom about why bond yields have been continuing to climb? So there's no shortage of kind of news driven driver news drivers for high yields. The war in Iran, continues to roll on and even escalate pushing oil prices, and so also inflation higher. Fed chairman Kevin Walsh, gave a hawkish speech at Jackson Hole. And as you mentioned, that has, pushed traders towards bets on a hike at the Fed's meeting next week.

The argument we make though, in research, led by my colleague, Jamie Rush, published in an essay on the Bloomberg terminal and bloomberg.com, this weekend, and in our book, the price of money, is that there's something deeper going on. There's been a structural shift from a world where there's too much saving, a savings glut, and not enough investment opportunities, a world in which too much saving means interest rates are falling, to a world where there's a dearth of saving, enormous investment opportunities, and that means structural pressure for interest rates, bond yields to stay high.

Tom, I admire the shameless plug for the book, again, the price of money. Tom Orlethwait, Jamie Rush, Stephanie Flanders, get that in there as well. Don't leave Stephanie out of the mix. Tom, let me ask you about that savings plan. Why why is it going away? What why is that happening? What are the consequences for borrowing gut borrowing costs as it goes away? So, if we spin the pages of the calendar back, to the early two thousands, the twenty tens, what was the kind of the world we were living in back then?

Well, firstly, demographic factors. The baby boomers were still working. They were saving for retirement, contributing to the global pool of savings. China and the Petro States had huge trade surpluses, and they were dumping those surpluses in the US treasury markets. And back then, strange to remember, but the world was still enjoying the post Cold War peace dividend. There was less concern about war, so there was less need to spend on defense, so governments weren't borrowing.

US government debt to GDP back in the early two thousands was around 30%, and The US was running a budget surplus. Spin the calendar forward to today, and all of those factors have spun into reverse. The baby boomers have retired. They're reading Bloomberg pursuits to decide where to spend their retirement savings. The relationship between China and The Petro States and The United States has considerably changed. They're not putting their money in US treasuries anymore.

The post Cold War peace dividend, well, that's disappeared. We're in a war right now. Defense spending has surged and contributed to an absolutely enormous increase in government debt. And, of course, AI is part of the picture. Trillions and trillions of dollars being spent on the build out of AI. So put those pieces together, and that's how we've moved from that world of too much saving and not enough investment and falling interest rates to not enough saving, too much investment, and rising interest rates.

Have we just gotten too used to artificially or just situationally low interest rates? I mean, I remember speaking to my parents who bought a house in the seventies at sixteen, seventeen, 15% interest rates. We had a combination of, you know, the economic crash followed by uncertainty, followed by COVID. We have had this for a while. Do we all just need to get used to it and and deal with higher interest rates? So, I I mean, I think the sad reality, is that, yes, we think that high interest rates are the new normal.

The problem is that in the world of low interest rates, government, businesses, households all took on a significantly, a significantly larger debt burden, right, thinking that it was gonna be something like a free lunch. Right? If interest rates are low, why not borrow? Right? There was a moment during the COVID crisis where interest rates were even negative. People were effectively governments were effectively being paid to borrow.

Right? But now with interest rates significantly higher, the cost of carrying that debt, the cost of rolling over that debt is just much, much higher. Give you an example. US interest payments now account for half of the budget deficit, and that's that means interest payments are squeezing out funding which could be used for the military, could be used for schools, for hospitals, for essential infrastructure improvements.

The bill for what we thought was the debt free lunch is now falling due. Tom, I wanna ask you about this Fed meeting next week. Looking again at the the work function on the the Bloomberg terminal seems like all but a done deal when it comes to a hike at this at this meeting next week, at least in terms of traders' expectations of what's gonna gonna happen there. But I'm I'm curious sort of how the chairman's remarks, which we've talked about at Jackson Hole, colors or what you'll be watching for in the remarks that presumably he'll give at the the end of that meeting on Wednesday.

So it's interesting, David. I mean, chairman Kevin Walsh spent a lot of time telling us that he needed to be quiet and listen to the markets because the markets were gonna provide a powerful signal. Well, the markets have spoken. Right? Bond yields significantly higher, bets on a Fed move, next week, putting it not quite at a certainty, but not too far off. Right? So, Walsh, in a sense, has painted himself into the corner.

He said he would listen to the markets. The markets spoken. They've told him to hike. If he doesn't, I think that's gonna be a blow to his credibility and a blow to the credibility of the Fed as an inflation fighting institution. The more interesting question, I think, now is what are the politics of this gonna look like? Right? President Donald Trump made no secret of the fact that he wants a Fed chairman to come in and cut interest rates.

Right? He said that when Powell was in charge, he's returned to the charge in recent weeks. And that means that for Walsh, what makes sense for the economy, what makes sense for the markets, What makes sense for the credibility of of the Fed as an inflation fighting institution is very much an interest rate hike at next week's meeting. But what makes sense for the White House and president Trump? Well, it's quite the reverse.

And so my prediction, with almost as much certainty as the markets are putting on a hike at next week's meeting, is that after the hike, there's gonna be some significant political blowback for Trump's pick as Fed chair. I was gonna ask you. So if you're Kevin Walsh, what do you do? If you're serving two masters, do you serve the market, do you serve the president who gave you your job? It sounds like you think he will serve the market.

But but then what I mean, we've already seen the president go after one Fed chair with mixed results. Do we think it escalates that quickly, or do we think I mean, this president, it's always hard to guess what he does, but the one place he seems to listen to reason and listen to expertise is sometimes on the markets. Yeah. I mean, potentially, there's a Goldilocks solution here. Right? Potentially, one of the reasons why bond yields at the long end, ten year, thirty year yields have been high in The United States is because of concern that the Fed is losing credibility as an as an inflation fighter.

Right? And so may