Posthaste: So long 'new normal.' The 'old normal' is back and that means higher interest rates

financialpost.com:

Remember the “new normal” after the great financial crisis? One analyst thinks it’s over and we’re heading back to the “old normal,” which ultimately means a world with more volatility and higher interest rates and a lower Canadian dollar, but with some silver linings, suggests Karl Schamotta, chief market strategist at Corpay Inc.

“The excess global liquidity that was previously suppressing interest rates and raising asset values is now beginning to shrink, and so that means that interest rates should settle closer to their long-term averages” in the range of about 4.82 per cent, he said, basing that number on 10-year United States Treasury yield data going back to 1790.

The Bank of Canada has currently set its benchmark lending rate at 3.25 per cent, with the market expecting another cut when policymakers meet on Jan. 29.

Most economists are betting on rates falling to the lower end of the Bank of Canada’s neutral range of 2.25 per cent to 3.25 per cent, but Schamotta reminds us that it’s the U.S. Treasury markets that set lending rates for things such as mortgages.

“The reality is that although the Bank of Canada does set benchmark policy rates in Canada, the global cost of borrowing is set in the United States,” he said. “It wouldn’t be a shock if we were to oscillate around the long-term average for 10-year Treasury yields.”

So, what was the new normal and should we be sad that it’s over?

The term, resurrected from the early 1900s by McKinsey & Co., was reportedly popularized by famous bond investor Bill Gross of Pacific Investment Management Co.

It was used in the wake of the global financial crisis to describe a global economy of sluggish demand, weak productivity in Western nations and “a glut of savings”