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Click to enlarge.
This doesn't exactly look like the 1970s, at least not yet. We're spending more time above the red line than below it.
Here's another way to look at that same data. The blue dot once again shows where we are today.
Click to enlarge.
If zero percent 1-Year Treasury rates are now semi-permanent (big if, think Japan though), then just under 2% would seem to be the fair value floor for the 10-Year Treasury rate.
The 1-Year Treasury rate is currently 0.21%
The 10-Year Treasury rate is currently 2.44%.
Source Data:
FRB: Selected Interest Rates
U.S. Treasury - Daily Treasury Yield Curve
9 comments:
Stag,
An inverted yield curve is still one of the best forecasters of a recession. ZIRP is one of the best indicators of deflation. The inflationistas are way off base as are those worrying about an "exit strategy".
The "experts" are morons. They can't fully see the problem because to do so they would have to admit to themselves that they have been wrong for years or even most of their lives. Religions don't die, they ignore and distort facts to suit their needs.
Chris Whalen is the latest "expert" to open his mouth and reveal his ignorance.
Even when these "experts" are partially right, it's often for the wrong reasons.
Here's the skinny. No matter what policies are implemented or what changes are made, the systemic corruption and rot ensure that the majority of Americans are screwed. Just look at the "fixes" so far. All policies benefit the crooks at the expense of the majority. All "fixes" preserve rather than eliminate the free lunch of the minority. That's not an accident. The crooks have more wealth and power than ever to CONtinue their wealth extraction shams. Our destiny is becoming self fulfilling. As awareness grows, the downward spiral tightens.
Attempts at change, such as the Tea Party, are a joke too. The well meaning are often misguided. And legitimate attempts at reform are easily discredited, hi-jacked or perverted.
Sorry to be a buzz kill, but trillions and trillions of fraudulent debt cannot be swept under the rug. Deep rooted fraud & corruption cannot be eliminated with flowery speeches. Turning the majority into indentured debt servants is not a viable solution.
mab,
Get this.
I was bummed yesterday that I didn't get to Costco in time to take advantage of their coupon sale.
Top on the list was four 8-packs of Progresso soup. My "hoard" was running low. The coupon was $2.75 off (x4).
I just read today's grocery ads. The prices are fantastic. 2004 pricing.
QFC is selling them @ 98 cents. Safeway will sell me 8 @ 88 cents. Albertsons will sell them to me @ 75 cents (vegetable only), but only if I buy 20 (mix and match sale).
Soup glut? Billionaires not eating their "fair share" of soup?
For the record, Costco has sold Progresso soup @ $1.37 per can for as long as I can remember. I thought the days of $1 soup sales at grocery stores was about over. Nope.
Stag,
I hear you on food prices. Denninger keeps going off about rising food prices but I just don't see it. Everytime we see items on sale we buy a shed load. The cupboards are stocked to the point I'm eating and drinking (soda) more than I should.
But it was never CPI goods that irked me really. It was the leveraged goods like housing and college education. And debt actually pollutes health care too as the government is the biggest purchaser and a massively leveraged one at that (deficits = leverage).
It's the debt stupidity that must end. Our Government wasn't always this corrupt or beholden to the wealthy and the finance industry. The debt enabled and caused that corruption. More and more, people hate the Government. That's a direct result of our corrupt debt system imo.
People know something is drastically wrong but they can't put their finger on it. They're attacking strawmen out of frustration. There's evil genius at work here - the source of the problem (debt) is disguised as a solution.
mab,
"People know something is drastically wrong but they can't put their finger on it. They're attacking strawmen out of frustration. There's evil genius at work here - the source of the problem (debt) is disguised as a solution."
100% agreement.
We're being sold the idea that taking on more debt right now is the "sure thing" bet of the century AND that inflation will save us.
The spread between the rate I can easily borrow (on my credit card for example) and the rate I can reasonably safely save (in I-Bonds and EE Bonds for example) is astronomical. I'm talking Neptune here. I'll pass.
Of course, I could just borrow against my house to invest in EE Bonds, if I wanted a heavily leveraged guaranteed "suckers only" losing bet that is.
The absolute level of interest rates is meaningless. All that matters is the spread. There's no more value at borrowing @ 7% to invest at 4% then there is to borrow @ 4% to invest @ 1%. I'd expect to lose 3% either way.
I'm reminded of the poster on TIP's message board who wanted to earn 11% with 10% inflation rather than 1% with no inflation. That guy must love big numbers and big taxes on illusionary (inflationary) gains. I most certainly do not.
Bonus thought.
I have proof that I am evil today.
I find myself rooting for the S&P 500 to cross 1200 again, if only to resume the "Rubicon" posts. For those just tuning in, I've called 1200 the Rubicon level. Once we cross it there is no turning back! (Other than the other 20+ times over the past 10+ years anyway, lol. Seriously. It has been 20+ times. No joke. Sigh.)
I'm reminded of the poster on TIP's message board who wanted to earn 11% with 10% inflation rather than 1% with no inflation. That guy must love big numbers and big taxes on illusionary (inflationary) gains. I most certainly do not.
I'm reminded of banking "expert" Christopher Whalen. He used to work at the Fed btw. In the same breath, the guy talks about deflation AND how the Fed is destroying savers. What does he expect 4% real yields on safe short term investments against a backdrop of deflation? He better hope it doesn't come to that.
mab,
"What does he expect 4% real yields on safe short term investments against a backdrop of deflation? He better hope it doesn't come to that."
The Fed's Zero Rate Policy Is Destroying America
Consider these two data points: First, an American retiree named Dianna who has seen her retirement savings rendered worthless by the ill-considered policy actions of the Federal Open Market Committee. Second, the action of the gold market, which is likewise suggesting that fiat paper dollars have no value. If you take the two observations together, it suggests to us that the Fed's actions are feeding global deflation and that the next leg down in the U.S. financial markets could be particularly severe -- especially if the Fed resumes printing more funny money.
So let me get this straight. The fiat dollars have no value even as the things Dianna would be buying keep getting cheaper during deflation?
I can't speak for Dianna, but my retirement savings are doing FAR better than I thought they would when I turned bearish in 2004. I planned for a far worse outcome. I was concerned about 1970s stagflation and the incredible tax burden my savings would need to endure (as I was taxed on inflationary gains).
This is what I think retirees should have planned on. Their money would keep up with inflation and nothing more. Even that is not a given, as the 1970s and the 2000s have shown.
You save $100. You later spend $100. When it is gone, it's gone. That to me is a realistic savings goal. Anything more than that is just a bonus.
Anyone who planned on saving $100, spending $10 each year, and still having $100 leftover was planning on way too many free lunches in my opinion.
Producer prices going up...consumer prices going down. That is not healthy, and cannot be sustained.
I am not sure how it applies to soup.
Anonymous,
"I am not sure how it applies to soup."
Soup is the key!
Keep your eye on the golden "bouillon" and chicken "stocks". Something "can" get "creamed" again if your trend begins to "mushroom". Think "chowder" kegs!
I can't pass up a pun opportunity. Sorry! :)
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