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I have a question goldenboy.
During the crisis the average maturity of US treasuries took a nose dive, and the average maturity has really been decreasing since about 2001. Only recently has it begun climbing again. What, if anything, does this change represent?
x -axis = year
y - axis = average maturity of debt held by the public (in weeks)
You want a quick way to stimulate the economy, cut a bunch of $10k checks to the bottom 50% of income earners.
It will be circulated through the economy and it will be done fast.
From looking at the graph, i am going to assume that the line represents all treasuries.
On the surface, a declining maturity is a sign of shrinking yields, which can be explained by an increase relative to proportion in short term debt issuance. This has occurred not only on the governmental front, but in private debt markets as well. The rise of money markets along with various SIVs (structured investment vehicles) undoubtedly played a role.
The change however shows (IMHO) that long term deflation (even extremely low inflation) is unlikely.
“One risk of further balance sheet expansion arises from the fact that, lacking much experience with this option, we do not have very precise knowledge of the quantitative effect of changes in our holdings on financial conditions."
Some Federal Reserve officials had hoped to reduce the bank’s balance and to focus on keeping inflation in check. But many economists now see deflation — an often self-perpetuating cycle of falling prices — as a greater threat. The Fed purchased $1.7 trillion in bonds during the financial crisis.
following it up with a firm governmental debt reduction plan and you have a home run.
I just want to make sure I am thinking this through correctly. Shrinking yields mean that the price of the treasuries are increasing,
which either means less treasuries are being issued or a higher demand for treasuries.
So if the fed gov issued less long term debt and more short term debt this would decrease the yields on long term debt and increase yields on short term debt (other things equal). This would create a "flatter" and lower yield curve since short term treasuries will typically yield less than long term treasuries.
Roosevelt essentially spent our way out of the Great Depression. But this time, we have a problem - We don't have any money left to do this.
I was under the impression that WWII debts from MOST of Europe never got paid ....He did nothing of the sort. Rebuilding Europe after WWII transferred the wealth from Europe to the United States. FDR did nothing but prolong the recovery. You are right about the empty coffers, though.
He did nothing of the sort. Rebuilding Europe after WWII transferred the wealth from Europe to the United States. FDR did nothing but prolong the recovery. You are right about the empty coffers, though.
Either way - though drones (play on "full scale attack") or printing more money --- we **** out of luck here.
Time to shut down the government - send these clowns home and let the market fix this. Unless of course, we can just print more worthless money ...
Roosevelt essentially spent our way out of the Great Depression. But this time, we have a problem - We don't have any money left to do this.
The price of treasuries are increasing, however the issuance of short term debt is increasing more so than face values (which are market determined for the most part).
Not entirely. More treasuries are being issued in the face of greater demand (which illustrates the post 2008 retracement).
It all depends on demand. Short term debt is in greater demand since 2000 partly because of a growing negative current account. Foreign trade partners (say China) have a greater demand for "two year" and less durations due to greater flexibility. Reason be, maturities are quicker which reduces the possibility of portfolio devaluation. Liquidating a slew of longer term debt would undoubtedly lower the face value in cases such as China or Japan (the latter is highly unlikely).
Inflation expectations are also quite low (which is critical in increasing demand for short term debt).
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