We all know where they have been and nobody really knows where they are going. What's important for us to know in order to be a trusted advisor is the what, when, and how's of the interest rates.

First and foremost it is vital to understand that there are only two ways that interest rates can increase; an increase in core inflation or a Fed tightening cycle. Core inflation is the most common culprit though as the Fed has only been in a tightening cycle 4 times since the end of the Cold War. Core inflation really began to take hold beginning in the 1950s when interest rates began their longest continuous rise in our history.

In the 1970s we saw long term Treasury yields higher than 7.5% for the first time in our nation's history and then interest rates peaked in 1982. There were many reasons for the precipitous rise in rates in the late 70's/early 80's but none more important than the Cold War which was a systematic shutdown of global democracy that hampered competition and drove rates to new highs.

The generally accepted end of the Cold War when the Berlin Wall fell in 1989, was the most significant turning point for interest rates as it caused interest rates to decline thanks to the world's newly found economic globalization, also known as global free enterprise which increased competition and productivity and reduced interest rates.