Back to Zero — and Beyond! [updated]

Updated 1/30/2020 – Treasury yield curve inverted relative to 1 month all the way out to somewhere between 10yrs and 20yrs!




Ten year TIPS yields that is; the 10yr-3mo spread is 4 bps.

Figure 1: Ten year – three month Treasury spread (blue), and Ten year TIPS yield (red), both in %. Source: Federal Reserve via FRED, Treasury, and author’s calculations.

21 thoughts on “Back to Zero — and Beyond! [updated]

    1. pgl

      Do you even bother to read what our host has written in the past? If you did – you would not have to ask this question. No – I suspect you are pre-programmed by your Russian masters to shoot off annoying and insulting troll hits whenever Herr Trump might be challenged. We asked you to go away but maybe we were not speaking your language. So in the words of Dr. Seuss:

      Marvin K. Mooney – Will You Please Go Now!

    1. Moses Herzog

      This brings to mind the old Billy Crystal and Christopher Guest late-night security guards skit: “I hate it when that happens.” [ to be said in a high-pitched voice ]

  1. Bob Flood

    So, private MPK is zero and inflation is minimal. I think the MPK in public infrastructure is huge, but deficit hawks say to ignore good sense and pretend government transfers are the same as government’s direct spending on goods. There really is no point (social product) to teaching econ. MC, give up on snow and come to Florida and play golf with me and Mike Dooley.

    1. 2slugbaits

      Bob Flood There really is no point (social product) to teaching econ.

      I get that you were being a little bit flippant, but I think you do raise a serious problem. It does seem to be the case that a little badly taught economics can be worse than no economics training. This is especially true with macroeconomics. One problem is that basic intro level macro intended for non-econ majors tends to be narrative rather than quantitative and tends to rely upon a student’s intuition, which is a problem because a lot of economics is counter-intuitive. And even in the case of econ majors, some students are really more interested in political philosophy masquerading as economics. A good example is Paul Ryan. Yes, he got an economics degree, but there’s scant evidence that he took quantitatively rigorous classes. Instead, he globbed onto some libertarian professor and concentrated on the political works of folks like Ayn Rand, Friedrich Hayek and Milton Friedman. The econ classes he took were just the other half of his double major, with his real passion being undergraduate level political philosophy. And then there’s CoRev, who once admitted to having taken an intro econ course a million years ago. Since CoRev has zero math skills and couldn’t solve a simple differential calculus problem is his life depended on it, my guess is that his lone econ course was at a very low level of scholastic rigor. CoRev learned just enough to be dangerously ignorant. So maybe academia should stop teaching intro level macro. Let them fill their core requirements with some sociology course instead!

      1. baffling

        “CoRev learned just enough to be dangerously ignorant.”
        this is a problem in many fields. i blame it partly on the teachers and partly on the students. in my opinion, what tends to happen is a professor makes a statement to make a point (often to denigrate the “opposing” side of his field) with a rule of thumb that is presented as a fact. to the more educated in the field, the nuance is understood as not really “fact” but the credible outcome of certain preexisting conditions. unfortunately for a student who is totally and hopelessly unaware of the significance of such “preexisting conditions”, the statement becomes fact and future mantra. in the simple undergrad course, there is usually not enough time to dedicate to the full details of the statement and cautionary outcomes, and the student walks out of the course repeating “fact” for the next four decades. this is the problem with survey courses of technical fields. but many students could not pass a hard core intro course in most fields of study. so there you have it, fill the elective with sociology. or my favorite, jazz history and literature. or reduce the number of credits required for graduation and make college a three year experience?

        1. Barkley Rosser

          Interesting that while many have mentioned him, CoRev has so far laid low on all this.

          Regarding this stat, I note that at ASSA Jim Hamilton as downgraded its importance as a forecaster of future recessions, in his case because probably the natural rate of interest has fallen, at least partly because of declining inflation expectatinos, nothing about the marginal product of capital, a concept I have a problem with in the aggregate, as an old participant in the Cambridege controversies in the theory of capital, which Bob Flood probably dismisses as a lot of nonsensical whooey.

          1. Moses Herzog

            I got where CoRev doesn’t even bother me that much. But my biggest problem was when he tried to move the markers or change the original context of the soybeans disagreement. I think when he did that that would have been the point I would have certainly thought about banning him. He had his right to make his vacant arguments and let his steam out, but people lose respect when “you” can’t learn from the situation and just admit you were wrong about something. It’s so obvious to everyone at this point, so why not just come clean on it?? Everyone is wrong sometimes. I got the Tulsi Gabbard candidacy wrong. I got trump’s original tariff’s wrong. I’m sure some other things also. It’s not the end of the world just to say you got something wrong. Eating some humble pie is good for the soul sometimes.

            I thought about putting a haha YouTube song reference link up, but I think I’ll spare Menzie for today. Would “He Stopped Loving Her Today” have been a good one?? God only knows when I get me a big bottle of Zinfandel again though. I don’t know why I always want to put song links up when I drink. I always swear to myself I won’t and then after about 3 glasses it’s like Tourettes syndrome er something.

  2. Moses Herzog

    There are other important numbers that have been reported in the last 48 hours that are positive looking. However I thought this one was worthy of note. For the record I don’t put as much weight in “consumer confidence” (the Michigan U numbers or others) as many other people do:

    For example, if inflation is low or fuel prices are low, won’t most consumers feel quite good about that in the short term?? It really doesn’t mean sh– in my opinion. My Dad bought a small motel in the late ’70s. I’m pretty sure he wasn’t feeling too bad about the economy right before he purchased that motel. My Dad read the paper avidly, but really only knew slightly more about running a business than someone you randomly grabbed off the street. Which to me is about what a cross-section of consumer emotion is going to tell you.

    1. Willie

      But, the confidence of the great mass of consumers tells you a lot about how much money they are willing to spend. Which has an effect.

  3. pgl

    To show everyone a small slice of how slimy the GOP has become, I have had a running battle for years with certain Republican groups over something as simple as their constantly sending emails to my work email system. Yea I am a consultant for an evil corporation so you Bernie Bros can hate me. But my employer is not exactly Republican and not amused with the political abuse of my work email. The Democrats flood my personal email account, which I often ignore (sorry). But Republicans have flooded my work email even though I replied to these creeps repeatedly that their emails are both illegal and could be grounds for me being fired (no real worries as my employer loves me anyway – go figure). But since the Trump impeachment, I have had to endure two things. McConnell flooding my Facebook asking me to spend him campaign money to support his undermining the our Constitution – to which I have repeated replied telling him to support with some choice words telling him what I really think of this clown (so glad my mom does not use the Internet as vulgarity is not here thing). The other thing is some junk from a Trump website called “patriot” which my work email sends to spam. But before I deleted the latest I decided to share what they said:

    “With only 3 days left, Senate Republicans are in danger of falling short of this month’s goal. They need YOU to join the fight. Chip in now to defend our Republican Senate Majority and prevent a liberal takeover!”

    Liberal takeover must mean the Democrats gaining control of the Senate and kicking McConnell out of his dominance of the Senate. Seriously – I’m supposed to contribute to the destruction of our democracy? Are they that scared that they are supporting the Traitor in Chief will cost them the Senate? Are they even under the delusion that the good citizens of Kentucky will not vote McConnell out of office entirely?
    Send us money! Vote for us! Let’s turn the USA into the Soviet Union! Your modern Republican Party!

  4. Moses Herzog

    Many people missed something very important today. Jay Sekulow is a legal mastermind and uh, well, like a genius and stuff. And when you’re defending a client and a case that is indefensible you pull out a little known legal maneuver, only known to the most elite judicatory minds on Earth. You can find it in very small footnotes of the best legal texts. It’s called “The Robot from ‘Lost In Space’ Impeachment Defense”. It’s a masterwork of technique and legal artistry.

  5. baffling

    sekulow has basically said yes, my client is guilty, but what are you going to do about it. he has dared any republican to go against trump, even though he has admitted the guilt. and i am afraid that most republicans in that chamber are so scared of trump, they are willing to publicly vote to not convict a defendant who has actually admitted guilt, to avoid the criticism from lord trump. i hope those senators understand what the optics will look like on the campaign trail over the next four to six years.

    1. pgl

      Lamar Alexander will vote against new witnesses as he has all he needs to conclude Trump is guilty. So what will he do about? Acquit. What a coward. Of course this coward is not running for reelection.

      Apparently Feingold wrote an excellent letter to his former colleagues in the Senate. Does anyone know if a copy is in the public domain yet?

  6. pgl

    Just checked FRED for TIPS (real) interest rates:

    5 year: negative 17%
    10-year: negative 4%
    20-year: 17%
    30-year: 32%

    From 5 years on, real rates are tracking nominal rates minus expected inflation around 1.7%.

    And Trump keeps yelling how great the economy is doing and at the same time whining that the FED’s policies are too tight. Yea – inconsistent nonsense!

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