Divergences: Interest Rates, Nominal, Real, Short, and Long

I’ve been wrapping up some long term projects (not planned as long term — they just took longer than expected) on interest rate parity and term spreads, and that spurred me to look at current patterns in interest rates. Some quick observations: interest rates remain higher in emerging markets than in core industrial countries. So too are real rates are higher despite higher inflation rates. And term spreads are larger in the US than other countries.

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How Much More Dollar Appreciation?

One important factor in the growth prospects for the US economy is the trajectory of the dollar. [1] If the dollar stabilizes at March levels, US economic growth might rebound. On the other hand, continued appreciation bodes ill. Based on history over the floating rate era, the expected duration of an appreciation is about 5 years (depreciations about 2 years). The current surge in the dollar has only been going on for only slightly over half a year, although when dated from the trough of 2011Q2, it’s been going on just a bit over 4 years. Either way, by this metric, it appears that there is still some additional way to go before the dollar peaks.

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Friday Night Music to Come: “The Creature Quartet”

My wife, Laura Schwendinger, is having her composition, “Creature Quartet”, premiered at the Wisconsin Union Theater on May 8th. The Quartet is made up of four larger movements which are framed by smaller movements, each one an ode to an extinct, endangered or mythical creature.

The performance will be performed by the acclaimed JACK Quartet [short musical excerpt – sound file], and accompanied by animations by Pauline Gagniarre.

Creature Quartet still 2

From Pauline GAGNIARRE on Vimeo.

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