The Price of Money Is Becoming Political Again

For much of the post-financial-crisis era, wealthy economies became accustomed to an extraordinary condition: money was cheap. Governments could borrow heavily, companies could finance expansion at modest rates, asset prices could rise on abundant liquidity, and households learned to treat low-cost mortgages as something approaching economic normality. That world is disappearing fast. Across major economies, long-term government borrowing costs have climbed towards levels not seen for years or decades. On 17 August, the US 30-year Treasury yield reached roughly 5.31 per cent, its highest level since 2007. Japan’s 10-year government bond yield subsequently approached 2.95 per cent, a three-decade high, while German borrowing costs have risen to 15-year highs. The OECD describes the present combination of elevated financing requirements and elevated yields as exceptional compared with the previous two decades. Behind those numbers is a larger structural contest. Governments need capital for debt refinancing, defence, infrastructure, pensions, healthcare and climate resilience. Technology companies require extraordinary sums for artificial-intelligence infrastructure. Energy systems require grids, generation and storage. Businesses require investment. Families require mortgages and credit. These demands do not occupy separate universes. They ultimately encounter the same fundamental economic resource: capital. And when many powerful institutions want more of it simultaneously, the price of money stops being an obscure financial-market variable. It becomes a question of who gets financed, at what price, and at whose expense.