In the 2008 financial crisis, central banks prevented a global economic crisis through rigorous interest rate cuts. But what started as an emergency measure over 10 years ago has become a collective hostage situation.
The Prison of Low Interest Rates
There's no escape from this self-created prison. Any normalization of interest rates would likely endanger economic growth, reignite the euro crisis, overstrain the real estate market, or painfully remind some states of their enormous debt burden.
Switzerland as a Victim of Its Own Success
Switzerland is a victim of its own success in this regard. The Swiss franc has become a kind of paper gold. Everyone wants it, and thus the franc keeps getting stronger. Due to the strong interconnection with the eurozone, the Swiss National Bank's room for maneuver is extremely small.
Therefore, at Cashare, we assume that the National Bank will not be able to raise interest rates for a long time – another rate cut is even conceivable.
The Consequences of Low Interest Policy
The consequences of this worldwide low interest rate policy are sometimes grotesque:
- States and companies can currently finance themselves at 0% or even less
- According to a Financial Times publication, bonds worth over 16 trillion dollars now have a negative yield
- This equals almost the entire gross domestic product of the European Union
- Even for long maturities, interest rates are very low – Austria issued a 100-year bond at 1.2% in June
The losers here are savers who no longer receive interest on their money and may even have to pay for their money in their account in a few months. We probably need to prepare for a situation like in Japan, where interest rates have been at record lows for over 20 years.
What Can Investors Do?
Since nobody knows the future, the broadest possible diversification of assets is necessary. Cash flows also need to be carefully planned.
- Risk-free investing: Those who want or need to invest their money risk-free have to endure negative interest rates
- Stocks: Those with more risk appetite can consider investing in stocks. But you need good nerves to withstand the fluctuations
- Crowdlending: Another investment option with attractive interest rates is investing in loans through crowdlending
Here, Cashare as a fintech pioneer since 2008 offers a wide selection of attractive loan projects with different risk/return profiles.
Your Investment Specialist Michael Boge!
