He also acknowledges that the current rate environment ultimately comes at a cost. And, perhaps ironically, that cost can be measured in much the same way as inflation.
“Inflation erodes wealth. Negative interest rate, negative real interest rate, also erodes wealth, just over time,” Lorenzen said. “The phenomenon is not really different. Negative interest rate or very high inflation are similar phenomena.”
“You can argue about what inflation really is,” he said. “Is it the old school metric, a basket of goods, or is it something else?”
For now, the “base of all assets is the interest level” and “as long as we don’t have any inflation at all and central banks support markets in general, as they do, then this is what we’re looking into” to sustain returns, he said.
“Interest rates are very low and they are low for a reason,” Lorenzen said. “There is no inflation at all.”
--With assistance from Paul Dobson.
This article was provided by Bloomberg News.