The fall in real interest rates

A recent study by the Bank of England shows that, due to significant short-term fluctuations, real interest rates in Europe, the United States and Japan since this was possible have fallen since the start of the 14 th century, from more than 10% at that time to 0% today. The decline in real interest rates over the past 40 years is therefore only a partial episode of a long downward trend in real interest rates. A trend fall in real interest rates over such a long period of time cannot be linked to temporary and cyclical factors, such as expansionary monetary policies, periods of trade openness with new countries or disinflation. It can be explained: By a trend slowdown in technological progress; but this explanation is not convincing given the acceleration in technological progress in the 19 th and 20 th centuries; Rather, by an ex ante trend increase in available savings relative to investment needs. If the very long-term trend is a fall in real interest rates, and if this trend continues into the 21 st century, then, regardless of the monetary policy conducted, it is possible to conduct a very expansionary fiscal policy with accumulation of public debt . 1 Paul Schmelzing, « Eight centuries of global real interest rates, R-G, and the ‘suprasecular’ decline, 1311–2018 », Bank of England Staff Working Paper n °  845, janvier 2020.