Investors are encouraged to take on additional risk because the current interest rates are low. For decades, the interest rates have been declining. It is no exaggeration saying that capital expenditure has been inadequate in curbing interest rates from trending down for over three decades. The low-interest rates have compelled central banks to slow down their monetary policy, for nominal interest should not fall below zero. A submission from the literature affirms that there is no general agreement as to the principal causes of it. Many have ascribed the caused to an increase in global saving, characteristics of a high-saving emerging market. Some arguments reiterated that interest rates are low, as a result, of the rising concentration of wealth and income.
Undoubtedly, the wealthy use smaller portion of their income and on many grounds the recent global trends in wealth and income distribution are disturbing. For global interest rates to be affected, the trends in income and wealth distribution are required to be translated into increased global savings. However, there is no evidence to support it. The second reason that can be given to explain why interest rates are low is a lack of attractive investment projects. However, this cannot be used as a diagnosis of stock markets where equities are being traded at record-high prices. The damage done to the labor force and the economy during the Great Recession can be linked to depression of investment and interest rates.
The morale and skills of the workers detached from the labor market, as a result, of economic recession have been eroded, with many having no incomes to spend. Firms are faced with challenges, such as shortage of qualified workers, and poor demand for their products. In response, the firms resort to low-capital spending that eventually leads to low-interest rates. Considerable merit can be attached to this above argument; however, it cannot explain why capital expenditure has been inadequate to curb rates from trending down for over three decades.
Critically looking at why interest rates are low, it would be deduced that the reasons are multiple needing multiple treatments. More public spending on education, infrastructure, and research to make up for the shortfall in private capital spending should be encouraged. Tax incentives should be given to firms to employ the long-term unemployed workers. Finally, the central banks should fix a greater inflation mark to enable them in cutting the nominal interest rates in relation to a future slowdown.
Gold tends to go up with inflation so you can profit from this by buying it. You can also buy companies that mine gold by doing gold stock investing. Many mining stocks fell in 2011 and 2012 in a bad bear market and are starting a new bull market that will bring profits to shareholders.