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Click to enlarge.
Four exponential trend lines and their growth rates have been added.
Note that each time an exponential trend fails, it is replaced with an exponential trend of lesser quality. What doesn't kill us, doesn't make us stronger. Go figure.
The next chart shows the long-term trend of those growth rates. I'm using the midpoint of my hand-picked expansions as the x-axis.
Click to enlarge.
The most recent data point is open to serious revision. The growth rate probably won't change much, but the x-axis position may (it could move to the right on the chart). It really comes down to how long this expansion lasts.
Real yields have fallen because real GDP growth has fallen (and continues to fall). It really is just that simple. Put another way, it is becoming harder and harder to make money off of money (current lofty stock market valuations notwithstanding).
Those hoping for a return to normal better hope that the downward trend does not continue, because that's about the only normal thing going on right now.
The future's so bright I gotta werewolves.
See Also:
The Long-Term Death of Real Yields
Source Data:
St. Louis Fed: Real GDP
6 comments:
Note that real GDP growth would be worse if I factored in what the economic contractions were doing. That's epecially true when considering the Great Recession's impact.
In theory, the harder something falls, the bigger the bounce.
In practice, real GDP fell extremely hard during the Great Recession, so where is our extreme bounce to go with it?
Real yields are failing because current monetary policy is not supportive of real yields.
Why is this even an issue?
Our grandparents benefited from real yields above liestyle. Our parents benefited from the same. We are expected to pay their tabs and our tabs despite never being asked to shoulder the burdens.
Rob Dawg,
Real yields are failing because current monetary policy is not supportive of real yields.
This entire economy is not supportive of real yields. For what it is worth, I never bought long-term TIPS and I-Bonds because of the Fed. I bought in spite of them.
Our grandparents benefited from real yields above liestyle. Our parents benefited from the same. We are expected to pay their tabs and our tabs despite never being asked to shoulder the burdens.
Indeed. You even have a splendid Freudian slip there (or intentional pun ;)). Either way, I love it!
Liestyles! Yes!
When the housing bubble was near the peak I would joke that it would be an embarrassment to own a $500k+ house and not park a $50k car in front of it. What would the neighbors think with a clunker sitting out there?
So what if you can't afford either the house or the car? Liestyle!
A $500k house becomes a $400k house and you still owe on that $50k car too? Nobody could have seen that coming! Liestyle!
Liestyle: What people tell themselves when they really, really want to keep up with the Joneses but can't afford it.
Real yields are falling because we're getting swamped with too much savings and not enough spenders.
And by savings, I mean 1%ers, since they have all the income now.
http://research.stlouisfed.org/fred2/series/GINIALLRH
The only way the working class can get some scratch now is to borrow it, from the "savers".
my thesis, in picture form:
http://www.dailykos.com/story/2014/02/17/1277416/-Cartoon-The-one-rich-guy?detail=hide
The fun thing is that when I was researching this ca. 2007 there really wasn't much out on the web about Gini, income distributions, etc.
Now, I get the sense the ugly reality is slowly, slowly seeping into the discussion.
Troy,
Now, I get the sense the ugly reality is slowly, slowly seeping into the discussion.
I hear you. Growing income inequality had a lot to do with why I became a permabear back in 2004.
There Can Be Only One!
Why Income Inequality Really Matters
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