You Grew Up at Low Tide: High Interest, Low Interest, and the World You Have Never Seen

Contents

1. The harbor
2. The price of time
3. Stocks and bonds at two water levels
4. Savers and debtors
5. Two harbors, side by side
6. What AI does to the tide
7. Five predictions
8. The claim ledger

My students are about twenty-four. They were six years old when the Federal Reserve pushed its rate to zero in December 2008. Apart from a modest climb in the late 2010s, it stayed on the floor until they were twenty. Every instinct they have about money was learned in that stretch: cash is trash, buy the dip, borrowing is cheap, houses only go up, a startup should grow first and earn later.

They think that was the weather. It was the tide. And the tide has turned.

They did see rates rise in 2022 and 2023. But they were twenty, with almost nothing in the water, and the rise was described to them as a temporary storm. So I want to give them a picture that lasts longer than a headline, and a few principles that will still be true when the numbers have changed.

01 · The pictureThe harbor

Think of a harbor. The water level is the interest rate: specifically, what safe money pays you for doing nothing but waiting. Lend to the U.S. government for a few months, or leave cash in a money market fund, and the water lifts your boat.

At high tide, the water is at the dock. Your boat floats where it is tied. You do not have to go anywhere to earn something.

At low tide, the harbor drains. Your boat sits in the mud. If you want to reach water, you have to walk out across the flats, onto the sandbars and rocks and long mudflats where the footing is uncertain. That walk has a name. It is called taking risk. At low tide, everyone takes it, because the only water left is far out.

Warren Buffett’s famous line is that you only learn who has been swimming naked when the tide goes out. With interest rates, the danger runs the other way. The people who get caught are the ones who walked far out onto the flats at low tide, often on borrowed money, and were still out there when the water came back in. It always comes in faster than anyone expects.

02 · The principleThe price of time

Strip away the jargon and an interest rate is a price. It is the price of time: what someone pays to have money now instead of later, and what you earn for letting them. Irving Fisher built his theory of interest on that idea in 1930. People are impatient, the future is uncertain, and so a dollar later is worth less than a dollar now. The rate tells you how much less.

It is one of the oldest prices there is. Sumerian farmers borrowed barley against the harvest. Babylonian law regulated what lenders could charge. The record runs unbroken through Rome, the Venetian banks, the Dutch and the British, all the way to the app on your phone. The historians Sidney Homer and Richard Sylla spent careers assembling it. In 2015, Andy Haldane, then chief economist of the Bank of England, had his researchers check the whole record and reported that rates appeared lower than at any time in five thousand years.

You did not grow up in a normal world with low rates. You grew up at the lowest tide ever recorded.

Now look at the formula under the harbor. Every asset in the world, a bond, a share of stock, a house, a business, a degree, is a stack of future payments. The rate is the scale that converts those future payments into a price today. When the rate is near zero, a dollar promised thirty years out is worth nearly a dollar now. When the rate is high, that same distant dollar shrinks to a fraction of itself, while a dollar promised next year barely changes.

Drag the slider and watch the towers. The near ones hardly move. The far ones collapse. That single shape explains most of what follows.

03 · The decisionStocks and bonds at two water levels

A bond is the simplest tower. It is a written promise: lend me money, and I will pay you a fixed amount on a schedule and then return what you lent. Its payments are known in advance. Only the water changes.

So a bond’s price moves opposite to the rate. If you own a bond that pays 2% and the tide comes in until new bonds pay 5%, nobody will pay full price for yours. Its price falls until what it pays matches the water. The longer the promise, the farther out on the flats the tower stands, and the harder it falls. This is not theory. In 2022, as the Fed lifted rates off zero, U.S. government bonds had what Deutsche Bank’s strategists counted as their worst run since 1788, the year before the Treasury Department existed. Funds holding long-term Treasuries, the asset everyone calls safe, lost more than a quarter of their value.

A stock is a tower whose height nobody knows. It is a claim on a company’s profits, forever. Because those profits stretch far into the future, stocks are long towers too, and the companies that promise to earn their money latest are the longest of all. A young company that expects to make its real money in 2040 is almost entirely far tower. At low tide it can be priced as if 2040 were next week. At high tide the market asks a harder question: what do you earn now?

That is why the choice between stocks and bonds is never really about stocks or bonds. It is about the water.

At low tide, TINA. When the ten-year Treasury paid less than one percent, as it did in 2020, a saver who wanted any return at all had a short list. Cash paid nothing. Bonds paid almost nothing and would fall when rates rose. So investors said there is no alternative and walked out onto the flats into stocks. Margaret Thatcher made the phrase famous defending markets; Wall Street borrowed it for the 2010s. Notice what TINA is and is not. It was never a reason to like stocks. It was a reason to dislike everything else. And when millions of people buy something because they feel they have no other choice, its price stops telling you much about its value.

At high tide, TARA. Once the Fed began raising rates in 2022, strategists at Goldman Sachs and elsewhere started saying there are reasonable alternatives. A government bond paying four or five percent is a real choice, not a placeholder. Here is a simple test you can run yourself. Turn a stock market’s price-to-earnings ratio upside down and you get its earnings yield, the profit you are buying with each dollar. Put it next to what a safe bond pays. At low tide, the earnings yield towered over the bond yield, and stocks looked cheap by comparison even when they were expensive by history. At high tide, the gap narrows, sometimes to nothing, and the question “why take the risk?” finally gets a real answer.

None of this means stocks stop being the long-run engine of wealth. Over decades, owning productive businesses has beaten lending to them, and it probably will again. What changes is the price of admission and the patience required. At low tide, you were paid to take risks you did not have to understand. At high tide, you are paid to wait, and you need a reason every time you choose not to.

04 · The transferSavers and debtors

Polonius told his son, “Neither a borrower nor a lender be.” In the 2010s he was wrong. The best financial position in America was to be a borrower who owned real assets.

Interest is a transfer. Every dollar of interest a debtor pays, a saver receives. So when the tide moves, it moves wealth between them, quietly, every month, for years.

At low tide, debtors win. Your parents could lock in a thirty-year mortgage near 3%; the record low in Freddie Mac’s survey, which goes back to 1971, was 2.65% in January 2021. Companies borrowed for almost nothing and used the money to buy back their own shares. Governments ran deficits that cost little to carry. Meanwhile the saver, the retiree, the careful aunt, the nineteen-year-old with four cents of interest, was paid nothing and, after inflation, less than nothing. Low tide is a tax on patience.

At high tide, savers win. Safe money pays again. A retiree can live on interest. A young person who saves a first ten thousand dollars actually watches it grow. And debtors pay. Freddie Mac’s thirty-year average was 7.18% this month. On a $300,000 loan, that is about $2,030 a month, against about $1,210 at the 2021 low. Same house. Same family. Roughly $820 a month for thirty years, decided by the water level on the day the papers were signed.

Then comes the part most people miss. High tide is not simply bad for the young and good for the old.

Ask which side of the trade you are actually on. A sixty-year-old owns houses, stocks and bonds. When the tide comes in, those things fall or stall; the sixty-year-old is the one standing out on the flats. A twenty-four-year-old owns almost nothing. For the next forty years you are not a seller of assets. You are a buyer. Low tide made the things you will spend your life buying expensive. High tide makes them cheaper, and pays you interest while you wait to buy them.

The one place high tide hurts you directly is debt, especially big, long debt taken on early. Which is exactly why the order you do things in matters more for you than it did for anyone who came of age in the 2010s.

Read the last row twice. Each tide has its own temptation. Low tide tempts you to stretch. High tide tempts you to freeze. The skill is not picking a side. It is knowing which water you are standing in.

05 · The turnWhat AI does to the tide

Why should the tide stay higher than you are used to? The short answer is inflation. The Fed raised rates in September for the first time since 2023 because prices would not settle, and this month markets were still betting on another increase in December. But the deeper answer is one Fed Chair Kevin Warsh gave at his September press conference, among his reasons long-term yields had climbed this year: competition for capital.

Here is the first principle. The rate settles where the supply of savings meets the demand to use them. For fifteen years the world had more savings than uses: aging populations putting money away for retirement, companies sitting on cash, too few projects worth funding. Too many lenders, too few borrowers. The price of time fell to the floor.

Now look at the line forming at the window. Building artificial intelligence is the most capital-hungry project of our lifetimes: chips, data centers, power plants and transmission lines, all paid for up front and earned back over years. Add governments borrowing heavily, rearmament, and the rebuilding of supply chains closer to home. When that many borrowers want the world’s savings at once, the price of savings goes up. That is my argument, not a settled finding. But it is the shape I would bet on.

There is a second, quieter way AI touches the tide, and it is personal. At low tide, idle money cost you nothing, because money earned nothing anywhere. At high tide, every dollar sitting idle in a checking account is leaking. A personal AI delegate that watches your cash, moves the idle part into something that pays, ranks your debts by what they cost, and tells you when the tide has gone out far enough to refinance is worth more at high tide than at low tide. The gap between people who manage their money and people who do not has always existed. High tide widens it. Delegates can close it.

06 · The forecastFive predictions

1. The near-zero decade does not come back on schedule.

   Absent a deep crisis, the safe rate in the United States will not return to near zero for any sustained stretch before 2030. The 2010s were the anomaly. Most of history looks more like now.

2. TINA stays retired.

   Through the end of the decade, a careful saver will be able to earn more than inflation on safe money in most years. Bonds go back to being a real choice in a portfolio rather than a placeholder.

3. Stories get repriced. Cash flow rules.

   Companies whose payoff is far away, including many AI companies, will have to show earnings sooner to command rich prices. Startups will raise less on narrative and more on revenue.

4. The 3% mortgage becomes a family heirloom.

   Home sales stay sluggish while millions of owners sit on low-tide loans they cannot replace. Your generation will rent longer and buy later than your parents did, and those who wait with savings earning real interest are not the losers they are told they are.

5. Delegates make the tide visible.

   Within a few years, personal AI will routinely sweep idle cash, rank debts by cost and watch for refinancing moments. At high tide that becomes ordinary money hygiene, and people without a delegate will quietly pay for not having one.

07 · Keeping scoreThe claim ledger

Go back to the nineteen-year-old with four cents of interest and a friend’s screenshot. Neither of them was wrong about the water. They were wrong to think it would always be gone. The tide is not the weather. It moves on a schedule you cannot see, but you can learn to read it.

You grew up on the flats. The water is coming back. Find your boat.

A way of seeing, written for my students. It is not investment advice. Figures are as of mid-November 2026.