Will long treasury rates be 10% soon?

[xela]

Re: Will long treasury rates be 10% soon?

Exactly what I meant in saying that we are looking at a deep multi-decade bear market in UST.

That big bouncing ball pattern, by the way, goes back much further than the 130+ years shown on the chart. And not only in US interest rates, but English and European rates as well.

In case anyone hasn't already picked up on it, that pattern can be looked upon as a manifestation of the Kondratieff Wave...

Mid-End 60s the wave is broken, I'm not sure I understand you bouncing ball analogy from there onwards? As in, the frequency has increased alot?
It rather screams 'bloody murder' to me..

[Finster]

Re: Will long treasury rates be 10% soon?

Mid-End 60s the wave is broken, I'm not sure I understand you bouncing ball analogy from there onwards? As in, the frequency has increased alot?
It rather screams 'bloody murder' to me..

I don't see a break in the wave ... rather I see a big increase in amplitude. Presumably associated with the step-wise abrogation of the formerly restraining gold standard. The Fed was created in 1913, domestic gold standard abandoned in 1933, and international gold standard abandoned in 1971.

So the peaks and valleys come at about the same timing as always, but get much more violent ... ironically, with the "stabilizing" influence of modern economic management...

[phirang]

Re: Will long treasury rates be 10% soon?

I don't see a break in the wave ... rather I see a big increase in amplitude. Presumably associated with the step-wise abrogation of the formerly restraining gold standard. The Fed was created in 1913, domestic gold standard abandoned in 1933, and international gold standard abandoned in 1971.

So the peaks and valleys come at about the same timing as always, but get much more violent ... ironically, with the "stabilizing" influence of modern economic management...

Our masters believe in Creative Destruction.

Too bad it works perfectly every time...

[xela]

Re: Will long treasury rates be 10% soon?

I don't see a break in the wave ... rather I see a big increase in amplitude. Presumably associated with the step-wise abrogation of the formerly restraining gold standard. The Fed was created in 1913, domestic gold standard abandoned in 1933, and international gold standard abandoned in 1971.

So the peaks and valleys come at about the same timing as always, but get much more violent ... ironically, with the "stabilizing" influence of modern economic management...

Well, a long winter then or a even longer; I sometimes doubt, given demographics, whether the past still is applicable today. Not sure how demographics is in the US, it's kinda bad in Europe, it broke down in the late 60s, but completely in the 70s and onward here..

[ASH]

Re: Boyle's Law Analogy

You should read that paper Rajiv (or sapiens?) posted - something about economic parasitism - anyway it went into detail about a gas law analogy & how inf/deflation extracted energy from the economy (the hysterisis problem). Very interesting as an engineer.

I skimmed that paper. The portion of the paper comparing the equation of exchange to an ideal gas law seemed superficial to me. It seemed to me that the author concentrated upon similarities of form (this equation looks like that equation) rather than similarities of meaning (economic exchange is like the kinetic theory of gases because...). There's nothing wrong with observing the similarity of form and saying "economic variable X is in the same spot as physical variable Y in this equation", but that alone does not demonstrate any deep equivalence. I was left thinking there might be something to the analogy, but unsatisfied with its presentation. PV=nRT is not itself a fundamental relationship; the ideal gas law can be derived from more basic physical principles (e.g. the dynamics of non-interacting gas molecules and equipartition of energy, etc.). Therefore, in my view, any meaningful analogy between the ideal gas law and the equation of exchange needs to address why the economic actors described by the variables in the equation of exchange have the same types of interactions as non-interacting gas molecules in the kinetic theory of gases. Otherwise, we are engaging in an argument like the Doctrine of Signatures.

[*T*]

Re: Boyle's Law Analogy

True, it is a superficial analogy. But the neoclassical economic model is itself a superficial analogy to conservative potential field theory. So I would say it is still an advance. Also just introducing hysteresis and time-dependence is also an important advance.

[Finster]

Re: Will long treasury rates be 10% soon?

Here is some historical perspective to chew on. Well over a century of ten year UST yields, inverted to connote price. Note the both the longer term bouncing-ball pattern and the range of variation therewithin. And especially note the power and persistence of the larger pattern, undisturbed by war, peace, prosperity and depression.


UST History




Using that as a springboard, we can speculate as to the range of possibilites for UST prices and yields over the next couple years. First we have the bull case, then followed by the bear case. Note that in both cases, we're looking at only about a percent or two of yield movement.

Bull Scenario




Bear Scenario

So far, at least, it appears the market has chosen the bullish scenario:



The ten year yield actually sported a 2 handle this week, and the two year ... a 0 handle...