Real interest rates, population ageing and the energy transition

Real long-term interest rates in OECD countries and globally are currently extremely low, due to both: The rise in the private sector savings rate; Central banks’ monetisation of public debt. An examination of the medium-term trend in real interest rates has to take into account : The outlook for the savings rate in a n environment of population ageing, which normally drives down the savings rate; The fact that the energy transition is likely to lead both to the destruction of capital, i.e. a fall in savings, and to an increase in investment needs. The normal conclusion is that we are going to gradually switch to a situation where there is a savings shortfall ( ex ante ) relative to investment and therefore rising real interest rates. This would lead to a downturn in asset prices and result in overindebtedness after a long period of very low real interest rates.