Illusion of Prosperity (The Chart)

This is a subset of my last chart.

22 years of tailwinds are coming to an end. We'd like interest rates to fall from here. Who wouldn't? People are expecting interest rates to fall from here. Interest rates have been falling for 22 years. There's just one problem: inflation. We've finally reached the point when real interest rates are so low that people would rather hoard rocks than dollars.

By most accounts, China is no longer exporting deflation. Oil is $80 a barrel. How on earth can we expect interest rates to continue to fall? We might get brief relief if we experience a recession (if you can call that relief), but I'm more concerned about the next ten to twenty years. Who is going to be supplying the tailwinds? I wouldn't put too much faith in the retiring baby boomers to supply it.

We're sitting at the bottom of the mountain with a snowboard strapped to our feet. It was a fantastic ride. Time to start climbing again if we want another one. Life happens. It won't be the end of the world.