Here are some terrifying stats that show many traders have no idea what real interest rates look like

REUTERS/Jim Bourg/FilesHe's probably a bond trader now.

Here is a terrifying set of statistics from Bloomberg if you're an investor over the age of 30. They describe how clueless the current set of City and Wall Street traders are going to be when the US and European central banks finally start raising interest rates:

• 30% of traders are so young they have NEVER experienced anything other than zero interest rates.
• 66% of traders have no adult memory of the dot-com crash of 2000.
• Only 43% of traders are old enough to remember the 2000 dot-com crash and the 2007 credit crisis - the two most significant economic cycles of the last 15 years.

Here is what that looks like in a chart, as tweeted by Bloomberg's Joe Weisenthal:

For those above a certain age, the current interest rate environment is an anomaly. Zero interest rates are an emergency measure. The kind of extreme act that only happens in a worst-case scenario, when a central bank needs to rescue an economy that can't otherwise function unless the cost of obtaining cash is negligible.

Yet we've been living with those central bank fire-alarm bells ringing permanently, at zero, for the better part of a decade. The US Fed hasn't enacted an interest rate raise since 2006.

The fear is that the current generation of traders - average age 30, according to Emolument.com - think this emergency is normal. They can't hear the fire-alarm ringing. To them, it's just silence. They have no idea - beyond business school textbooks - what higher interest rates look and feel like.

That's not to say that you can't learn from the mistakes of the past but analysing academic theory is a vastly different experience from living and working through a period of financial turmoil.

Those who were working during the time of the ill-fated hedge fund Long-Term Capital Management, which used to routinely produce high annual double digit returns but then lost £3 billion ($4.6 billion) in around four months following the 1997 Asian financial crisis, are a lot more gun shy when it comes to risk taking. 

Interest rates affect everything.

They set the cost of borrowing money.  They broadly sets bond yields and credit prices, and - via a knock-on effect - stock prices, too. 

Any investment has to return more money than you could earn simply by keeping your cash in the bank. At zero percent, virtually any investment has a greater return than cash deposits. But once rates tick upwards through 1%, 2%, 3% and on up to 5% (where they were 10 years ago) then stocks that can't grow at 5% a year are a waste of money. And companies - tech startups, etc. - that have profit rates of less than 5% are a waste of investment cash.

So when rates move upward, which they inevitably will, there will be a massive global reallocation of cash.

It will be wrenching and it will affect everyone.

But folks in The City and on Wall Street have never seen this happen before. 

Bloomberg quotes Yousef Abbasi, a global market strategist at JonesTrading Institutional Services LLC, who is looking forward to when Yellen, Carney and Draghi turn off the cheap-cash faucet:

"I'm very excited about it," said the 32-year-old, who began his current position in February 2011. "The macro environment has gotten so seemingly stuck in the mud that there are times I sit at my desk wondering what could actually shake things up."

Very excited!

It will indeed be "exciting." Here is an example of how exciting it can be. In 2000, when interest rates were at about 6%, the Nasdaq lost 80% of its value in 31 months, Bloomberg notes. Here is what that looked like, in case you're one of the 30% who have never seen it before:

NOW WATCH: We got our hands on 'Kinder Surprise Eggs' - the global candy favorite that's still illegal in the US

Please enable Javascript to watch this video