tag:blogger.com,1999:blog-5713178645208582139.post3113846109317713216..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: If You Think the Fed is Behind the Low Interest RatesDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-5713178645208582139.post-11204379783589280002013-02-18T22:56:12.330-06:002013-02-18T22:56:12.330-06:00"Long-term government yields on safe assets a..."Long-term government yields on safe assets across the globe have been declining since the crisis broke out. Something more than the Fed is at work (hint: think global economy buffeted by series of bad economic shocks)."<br /><br />If something more is at work, then are you saying the Fed is doing *some* work? <br /><br />Interest rates have been declining since the early 1980s. Yet Geoffnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-34927302069237249242013-02-18T05:08:09.631-06:002013-02-18T05:08:09.631-06:00We really enjoyed and benefited from your article....We really enjoyed and benefited from your article. Thanks and more power!Portland Website Developmenthttp://www.bizsuccesscenter.comnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-18449568862178281972013-02-11T23:47:42.900-06:002013-02-11T23:47:42.900-06:00I shared one of your previous posts on this subjec...I shared one of your previous posts on this subject with a PhD professor in a business school who is of the hard-money variety. His response was "But the other countries in the diagram are not a good comparison with the U.S. because their economies are more centrally planned. They can also manipulate interest rates to lower their governments' borrowing costs just as the Fed is doing for Justin D. Tapphttps://www.blogger.com/profile/12618278252714742391noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-7569791389608714212013-02-10T11:46:40.140-06:002013-02-10T11:46:40.140-06:00David,
On the margin, expectations embedded in bon...David,<br />On the margin, expectations embedded in bond prices worsened since 2009. On the margin, expectations in other markets improved since 2009. I'm open to any thesis that explains why expectations in these two sets of markets moved in opposite directions. <br /><br />Descriptions of factors affecting the current state of expectations (i.e. inflation shortfall, output gap, etc.) do Diego Espinosanoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-27888457856629691572013-02-10T00:36:54.796-06:002013-02-10T00:36:54.796-06:00Diego,
85% of marketable treasuries are not held ...Diego,<br /><br />85% of marketable treasuries are not held by the Fed. Even if we look to the long-end of the yield curve, almost 70% is held outside the Fed (and even this overstates the case since the weighted avg. maturity is just over 5 years). And the Fed's forward guidance on the ffr is determined by the economic outlook. So no, it is not a stretch to say treasury yields reflect for David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-12219569828756278772013-02-10T00:22:04.882-06:002013-02-10T00:22:04.882-06:00Diego,
I accept (1), but not (2) and (3). Inflati...Diego,<br /><br />I accept (1), but not (2) and (3). Inflation expectations increased in 2009, but have gravitated around 2.4%. There never was a "catch-up" period of temporarily higher expected inflation to make up for the shortfall in 2008-2009. If anything, inflation expectations have been more volatile. These developments are more consistent with a weak and uncertain economic David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-35745588810295318612013-02-09T21:43:58.234-06:002013-02-09T21:43:58.234-06:00Excellent blogging---I have been pointing this out...Excellent blogging---I have been pointing this out for a long time. The world is headed to ZLB. Japan got there first. <br /><br />Meanwhile, central bankers still wrap themselves in the mantle of glorious inflation-fighters.<br /><br />Talk about institutional ossification. Making central banks independent public agencies might have worked for the last 25 years---but it ain't working now, Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-49767603479943421072013-02-09T12:20:53.236-06:002013-02-09T12:20:53.236-06:00Diego,
Any thoughts on why stocks have been under...Diego,<br /><br />Any thoughts on why stocks have been under performing relative to high yield? http://bit.ly/UXSOTmFullcarryhttps://www.blogger.com/profile/01654174575386120137noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-88368847050518048542013-02-09T11:43:13.389-06:002013-02-09T11:43:13.389-06:00Fullcarry,
Using risk premia derived from Treasury...Fullcarry,<br />Using risk premia derived from Treasury yields is akin to assuming what you are trying to prove. In other words, assuming Treasury yields are market-determined to prove that Treasury yields are market-determined. <br /><br />At best one could say that the strong rally in risk assets is non-probative of improved market optimism over the path of NGDP growth. However, a strong caseDiego Espinosanoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-51657116309842430222013-02-09T10:43:27.781-06:002013-02-09T10:43:27.781-06:00Diego,
Can you elaborate on #3. Risk premiums sug...Diego,<br /><br />Can you elaborate on #3. Risk premiums suggest the exact oppositeFullcarryhttps://www.blogger.com/profile/01654174575386120137noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-62555476909741351962013-02-08T17:10:59.069-06:002013-02-08T17:10:59.069-06:00David,
1) RGDP expectations embedded in bond pric...David,<br /><br />1) RGDP expectations embedded in bond prices have fallen since 2009;<br /><br />2) Inflation expectations embedded in bond prices have risen since 2009.<br /><br />3) RGDP expectations embedded in virtually all risk assets have improved since 2009.<br /><br /><br />Does the "economic shocks" theses account for all three phenomena? If not, then either markets are Diego Espinosanoreply@blogger.com