Low interest rates can be considered both a blessing and a curse. The blessing is that the government yield curve impacts discount rates used across almost all financial assets. The curse is that they incentivise changes in economic structures (e.g. higher debt) which, in turn, make low interest rates more entrenched. The blessing and curse of low interest rates is therefore that they are (probably) here to stay.
History is littered with episodes where the rules of economics were declared dead, only for these rules to return with a vengeance. You remember the ‘end of the business cycle’ debate in the late 90s or the ‘great moderation’ paradigm of the early 00s? Despite these precedents and despite overwhelming evidence that large debt build-ups can end in tears, we believe a Chinese financial crisis is not that likely over the next 2-3 years.