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Global interest rates are unlikely to rise much further

 James Rogan

Hard facts suggest that interest rates for longer-duration debt instruments, especially sovereign debt, will fall this year.

First off, too many countries have a high level of government indebtedness . The net government debt is so high in many countries that as interest rates rise, the economic cost to service that debt becomes intolerable. Financing the debt crowds out necessary investment and becomes ever more burdensome. A negative feedback loop is created. When government uses tax dollars to fund deficits, those tax dollars are not available for activities that promote long-term growth. High levels of government debt reduce economic growth .

The U.S., Japan, and Italy are three countries burdened with very high levels of government debt. In addition, the private sector in all three countries has taken on debt. Many economists predict a recession , but recession or not, economic activity will slow. Some private companies will find it difficult to service their debt. Bankruptcies will increase. The Federal Open Market Committee, FOMC, continues to tighten monetary policy. The Bank of Japan and the European Central Bank are tightening monetary policy, and as monetary policy is tightened across the globe, the risk of financial contagion increases.

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