When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold.
Interpretation
Low interest rates can lead to inflated asset prices, with gold being a prime example of such a bubble.
This quote by George Soros highlights the relationship between low interest rates and the creation of asset bubbles in the market. Specifically, he points out that when interest rates are low, investors are more likely to inflate the prices of various assets, including commodities like gold, which can lead to unsustainable growth and eventual market corrections.
In practice
Discussing market trends during an economic seminar.
The securitisation of mortgages added a new dimension of systemic risk. Financial engineers claimed they were reducing risks through geographic diversification: in fact they were increasing them by creating an agency problem. The agents were more interested in maximising fee income than in protecting the interests of bondholders. That is the verity that was ignored by regulators and market participants alike.
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In January we start saving money, getting out of credit card debt, funding our retirement accounts, and we're doing wonderful. Then, every single year like clockwork, starting in November, all of you fall into this trap that says, 'I have to buy this gift... I can't show up at this party and not have something for everybody.
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