Those saying that the recent rise in interest rates is still inconsequential because relative rates remain below historic averages, are ignoring that debt service costs are a function of rate
and the amount of debt outstanding. With record debt at every level in pretty much every country today–consumers, corporations and governments–every rise in rates equates to a significant increase in debt service costs and less discretionary cash flows for other spending, saving and investment.
Pretending otherwise is whistling past economic graveyards. The chart beside shows the 47% increase in just US consumer credit over the last decade. Doug Kass explains this math below.
Doug Kass, president and founder of Seabreeze Partners, discusses a “new regime of market volatility” and the impact of the rising 10-year yield. Here is a direct video link.
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