So what's up with interest rates?

Seems like no end in sight to the economic expansion of the last couple of years. Normally, at this stage of the recovery we should be observing a marked surge in interest rates but things may indeed be a little different this time around. The structural changes in the global economy, most notably the emergence of China and, to a lesser extent, India have led to a surplus in liquidity looking for a place to park. With financial markets still at a relatively rudimentary stage in developing countries, a large chunk of this cash has found its way into the sophisticated markets of developed countries such as the US. This in turn has helped keep interest rates at unusually low levels, leading to a soft landing in the housing market and providing continued growth in corporate earnings. According to a recent businessweek article, the low interest rate environment is here to stay, at least for the next 10 to 20 years which is the estimated amount of time it will take these new emerging countries to develop their financial markets sufficiently. There is a caveat though in the form of greater volatility and a greater risk of default as lending conditions tend to be less restrictive. Unlike the great "new" economy deception which led to the market collapse in 2001, the theory behind low interest rates really does seem to hold, and this time around, things may well be different!