15th September 2026
Interest rate markets are in turmoil. Government bond yields are rising, inflation fears are growing, and financial markets are demanding higher returns. But there is a problem: centuries of interest-rate history suggest that what is happening now is highly unusual.
In this video, I look at Bank of England research tracing interest rates back more than 700 years. The long-term trend is striking. Both nominal and real interest rates have fallen dramatically over time. During major wars, real interest rates have often become strongly negative as inflation exceeded the returns paid to savers.
Today, we appear to be doing the opposite.
With war contributing to inflation, financial markets are nevertheless seeking positive real returns on government debt. That has profound distributional consequences. Higher interest rates reward those who own financial assets while increasing mortgage costs, rents and pressure on government spending, employment and the wider economy.
This is therefore about much more than bond yields. It is about who bears the economic cost of war, whether governments should submit to financial markets, and whether attempting to maintain high positive real interest rates could create both economic and social instability.
Markets are trying to overturn a historical pattern that has persisted for centuries. Can they succeed, and what happens if governments let them try? Will the cost be too great for society to bear?
00:00 Interest Rate Markets Are in Turmoil
01:01 What 700 Years of Interest Rates Tell Us
02:14 The Long-Term Fall in Global Interest Rates
03:27 Why Interest Rates Have Historically Fallen
04:40 What Real Interest Rates Reveal
05:48 Britain’s Interest Rate History Since 1950
07:04 Why Today’s Interest Rates Are an Aberration
08:13 What Happens to Interest Rates During War?
09:25 Why Markets Are Defying History
10:34 Who Benefits From Positive Real Interest Rates?
11:43 The Social Cost of Rising Rates
12:51 Governments Must Take Control
13:43 Why This Could Become a Social Crisis