Lacy Hunt: Low, Negative Long-Term Interest Rates Indicate Poor Business Conditions

HUNT: "Well, basically up until the crisis in 2007 to 2008, it was mainly the United States and Japan that were pushing the debt levels higher. The United States and Japan have moved it somewhat higher since then. But we've seen massive leveraging in China and many emerging markets. By the way, the debt, unfortunately, is a net negative. It's not a net positive. Debt is an increase in current spending in exchange for decline in future spending. We are not going to solve this problem that we have by trying to take on more and more massive amounts of debt."
SANTINELI: "All. Now, pursuant to that, let's go in a slightly different direction. I am looking at the Euro yield curve it is negative out to nine years. Nine years filrting with negative yields. The ten year bund flirted with five basis points. That was the low yield I saw. It seems we are going to go negative in ten year bunds. Is any of that significant, a, and b, is it going to help the conditions that you just described?"
HUNT: "I don't really think it will help conditions. The interest rates, these longer term interest rates are really excellent economic indicators. We forget that. The short term rates are controlled by the Fed but the longer the maturity, it's really a reflection of market action, and when business conditions are good, inflation rates rising, the long term yields will be going up. If business conditions are poor, then they'll drop. The fact that the rates are negative in many parts of the world, very low levels, virtually everywhere you look in the world, it's a reflection of how poor business conditions are, and these depressed business conditions are a direct consequences of our excessive indebtedness, both public and private."