Authors of ‘The Price of Money’ attribute rising borrowing costs to savings and debt, not monetary policy or Trump’s Iran conflict

The Price of Money: A Guide to the Past, Present, and Future of the Natural Rate of Interest, written by Jamie Rush, Tom Orlik, and Stephanie Flanders and published by Oxford University Press, makes the case that the so-called natural rate of interest, known in econ shorthand as r*, is climbing for reasons that have almost nothing to do with what happens in the Eccles Building or the Situation Room. The natural rate, explained without the jargon Think of r* as the Goldilocks interest rate: the real rate at which the economy runs at full employment with stable inflation. Too low, and you get overheating. Too high, and growth stalls. Central banks try to steer toward it, but they don’t set it. The economy does. According to the book’s empirical model, which covers twelve advanced economies and projects forward to 2050, r* bottomed out at roughly 1.7% in the mid-2010s. The authors forecast it will climb to around 2.8% by the 2030s. Translated into nominal terms, it implies 10-year Treasury yields settling into a range of 4.5% to 5%. Boomers giveth, boomers taketh away Starting in the 1980s, baby boomers entered their peak earning and saving years, flooding the global economy with capi...