Total Nonfarm Hires Jump from 5864 Thousand in Feb 2020 and 4047 Thousand in Apr 2020 to 5919 Thousand in Aug 2020 in the Global Recession, with Output in the US Reaching a High in Feb 2020 (https://www.nber.org/cycles.html), in the Lockdown of Economic Activity in the COVID-19 Event, Recovery Without Hiring in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, Fifteen Million Fewer Full-Time Jobs, Youth and Middle Age Unemployment, United States Inflation, United States International Trade, World Cyclical Slow Growth, and Government Intervention in Globalization
Carlos M. Pelaez
© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
IA1 Hiring Collapse
IA2 Labor Underutilization
ICA3 Fifteen Million Fewer Full-time Jobs
IA4 Theory and Reality of Cyclical Slow Growth Not Secular Stagnation: Youth and Middle-Age Unemployment
IC United States Inflation
IC Long-term US Inflation
ID Current US Inflation
II United States International Trade
III World Financial Turbulence
IV Global Inflation
V World Economic Slowdown
VA United States
VB Japan
VC China
VD Euro Area
VE Germany
VF France
VG Italy
VH United Kingdom
VI Valuation of Risk Financial Assets
VII Economic Indicators
VIII Interest Rates
IX Conclusion
References
Appendixes
Appendix I The Great Inflation
IIIB Appendix on Safe Haven Currencies
IIIC Appendix on Fiscal Compact
IIID Appendix on European Central Bank Large Scale Lender of Last Resort
IIIG Appendix on Deficit Financing of Growth and the Debt Crisis
The carry trade from zero interest rates to leveraged positions in risk financial assets had proved strongest for commodity exposures but US equities have regained leadership. On Aug 27, 2020, the Federal Open Market Committee changed its Longer-Run Goals and Monetary Policy Strategy, including the following (https://www.federalreserve.gov/monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications-statement-on-longer-run-goals-monetary-policy-strategy.htm): “The Committee judges that longer-term inflation expectations that are well anchored at 2 percent foster price stability and moderate long-term interest rates and enhance the Committee's ability to promote maximum employment in the face of significant economic disturbances. In order to anchor longer-term inflation expectations at this level, the Committee seeks to achieve inflation that averages 2 percent over time, and therefore judges that, following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.” The new policy can affect relative exchange rates depending on relative inflation rates and country risk issues. The DJIA has increased 195.3 percent since the trough of the sovereign debt crisis in Europe on Jul 16, 2010 to Oct 16, 2020; S&P 500 has gained 240.7 percent and DAX 127.7 percent. Before the current round of risk aversion, almost all assets in the column “∆% Trough to 10/16/20” in Table VI-4 had double digit gains relative to the trough around Jul 2, 2010 followed by negative performance but now some valuations of equity indexes show varying behavior. China’s Shanghai Composite is 40.0 percent above the trough. Japan’s Nikkei Average is 165.3 percent above the trough. Dow Global is 78.8 percent above the trough. STOXX 50 of 50 blue-chip European equities (https://www.stoxx.com/index-details?symbol=sx5E) is 27.2 percent above the trough. NYSE Financial Index is 66.8 percent above the trough. DAX index of German equities (http://www.bloomberg.com/quote/DAX:IND) is 127.7 percent above the trough. Japan’s Nikkei Average is 165.3 percent above the trough on Aug 31, 2010 and 105.5 percent above the peak on Apr 5, 2010. The Nikkei Average closed at 23,410.63 on Oct 16, 2020 (http://professional.wsj.com/mdc/public/page/marketsdata.html?mod=WSJ_PRO_hps_marketdata), which is 128.3 percent higher than 10,254.43 on Mar 11, 2011, on the date of the Tōhoku or Great East Japan Earthquake/tsunami. Global risk aversion erased the earlier gains of the Nikkei. The dollar appreciated 1.7 percent relative to the euro. The dollar devalued before the new bout of sovereign risk issues in Europe. The column “∆% week to 10/16/20” in Table VI-4 shows increase of 2.0 percent for China’s Shanghai Composite. The Nikkei decreased 0.9 percent. NYSE Financial decreased 1.6 percent in the week. Dow Global decreased 0.9 percent in the week of Oct 16, 2020. The DJIA increased 0.1 percent and S&P 500 increased 0.2 percent. DAX of Germany decreased 1.1 percent. STOXX 50 decreased 1.1 percent. The USD appreciated 1.0 percent. There are still high uncertainties on European sovereign risks and banking soundness, US and world growth slowdown and China’s growth tradeoffs. Sovereign problems in the “periphery” of Europe and fears of slower growth in Asia and the US cause risk aversion with trading caution instead of more aggressive risk exposures. There is a fundamental change in Table VI-4 from the relatively upward trend with oscillations since the sovereign risk event of Apr-Jul 2010. Performance is best assessed in the column “∆% Peak to 10/16/20” that provides the percentage change from the peak in Apr 2010 before the sovereign risk event to Oct 16, 2020. Most risk financial assets had gained not only relative to the trough as shown in column “∆% Trough to 10/16/20” but also relative to the peak in column “∆% Peak to 10/16/20.” There are now several equity indexes above the peak in Table VI-4: DJIA 155.3 percent, S&P 500 186.2 percent, DAX 103.9 percent, Dow Global 45.9 percent, NYSE Financial Index (https://www.nyse.com/quote/index/NYK.ID) 32.9 percent and Nikkei Average 105.5 percent. STOXX 50 is 7.7 percent above the peak. Shanghai Composite is 5.4 percent above the peak. The Shanghai Composite increased 69.0 percent from March 12, 2014, to Oct 16, 2020. Markets in China closed from Oct 1 to Oct 8, 2020, in the National Day Holliday. The US dollar strengthened 22.6 percent relative to the peak. The factors of risk aversion have adversely affected the performance of risk financial assets. The performance relative to the peak in Apr 2010 is more important than the performance relative to the trough around early Jul 2010 because improvement could signal that conditions have returned to normal levels before European sovereign doubts in Apr 2010.
Sharp and continuing strengthening of the dollar, with recent oscillation of dollar devaluation, is affecting balance sheets of US corporations with foreign operations (http://www.fasb.org/jsp/FASB/Pronouncement_C/SummaryPage&cid=900000010318). Recently, the dollar is depreciating. The Federal Open Market Committee (FOMC) is following “financial and international developments” as part of the process of framing interest rate policy (http://www.federalreserve.gov/newsevents/press/monetary/20150128a.htm). Kate Linebaugh, writing on “Corporate profits set to shrink for fourth consecutive quarter,” on Jul 17, 2016, published in the Wall Street Journal (http://www.wsj.com/articles/corporate-profits-set-to-shrink-for-fourth-consecutive-quarter-1468799278), quotes forecasts of Thomson Reuters of 4.7 decline of adjusted earnings per share in the S&P 500 index in IIQ2016 relative to a year earlier. That would be the fourth consecutive quarterly decline. Theo Francis and Kate Linebaugh, writing on “US corporate profits on pace for third straight decline,” on Apr 28, 2016, published in the Wall Street Journal (http://www.wsj.com/articles/u-s-corporate-profits-on-pace-for-third-straight-decline-1461872242), analyze three consecutive quarters of decline of corporate earnings and revenue in companies in S&P 500. They quote Thomson Reuters on expected decline of earnings of 6.1 percent in IQ2016 based on 55 percent of reporting companies. Weakness of economic activity shows in decline of revenues in IQ2016 of 1.4 percent, increasing 1.7 percent excluding energy, and contraction of profits of 0.5 percent. Justin Lahart, writing on “S&P 500 Earnings: far worse than advertised,” on Feb 24, 2016, published in the Wall Street Journal (http://www.wsj.com/articles/s-p-500-earnings-far-worse-than-advertised-1456344483), analyzes S&P 500 earnings in 2015. Under data provided by companies, earnings increased 0.4 percent in 2015 relative to 2014 but under GAAP (Generally Accepted Accounting Principles), earnings fell 12.7 percent, which is the worst decrease since 2008. Theo Francis e Kate Linebaugh, writing on Oct 25, 2015, on “US Companies Warn of Slowing Economy, published in the Wall Street Journal (http://www.wsj.com/articles/u-s-companies-warn-of-slowing-economy-1445818298) analyze the first contraction of earnings and revenue of big US companies. Production, sales and employment are slowing in a large variety of companies with some contracting. Corporate profits also suffer from revaluation of the dollar that constrains translation of foreign profits into dollar balance sheets. Francis and Linebaugh quote Thomson Reuters that analysts expect decline of earnings per share of 2.8 percent in IIIQ2015 relative to IIIQ2014 based on reports by one third of companies in the S&P 500. Sales would decline 4.0% in a third quarter for the first joint decline of earnings per share and revenue in the same quarter since IIIQ2009. Dollar revaluation also constrains corporate results.
Inyoung Hwang, writing on “Fed optimism spurs record bets against stock volatility,” on Aug 21, 2014, published in Bloomberg.com (http://www.bloomberg.com/news/2014-08-21/fed-optimism-spurs-record-bets-against-stock-voalitlity.html), informs that the S&P 500 is trading at 16.6 times estimated earnings, which is higher than the five-year average of 14.3 Tom Lauricella, writing on Mar 31, 2014, on “Stock investors see hints of a stronger quarter,” published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702304157204579473513864900656?mod=WSJ_smq0314_LeadStory&mg=reno64-wsj), finds views of stronger earnings among many money managers with positive factors for equity markets in continuing low interest rates and US economic growth. There is important information in the Quarterly Markets review of the Wall Street Journal (http://online.wsj.com/public/page/quarterly-markets-review-03312014.html) for IQ2014. Alexandra Scaggs, writing on “Tepid profits, roaring stocks,” on May 16, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887323398204578487460105747412.html), analyzes stabilization of earnings growth: 70 percent of 458 reporting companies in the S&P 500 stock index reported earnings above forecasts but sales fell 0.2 percent relative to forecasts of increase of 0.5 percent. Paul Vigna, writing on “Earnings are a margin story but for how long,” on May 17, 2013, published in the Wall Street Journal (http://blogs.wsj.com/moneybeat/2013/05/17/earnings-are-a-margin-story-but-for-how-long/), analyzes that corporate profits increase with stagnating sales while companies manage costs tightly. More than 90 percent of S&P components reported moderate increase of earnings of 3.7 percent in IQ2013 relative to IQ2012 with decline of sales of 0.2 percent. Earnings and sales have been in declining trend. In IVQ2009, growth of earnings reached 104 percent and sales jumped 13 percent. Net margins reached 8.92 percent in IQ2013, which is almost the same at 8.95 percent in IIIQ2006. Operating margins are 9.58 percent. There is concern by market participants that reversion of margins to the mean could exert pressure on earnings unless there is more accelerated growth of sales. Vigna (op. cit.) finds sales growth limited by weak economic growth. Kate Linebaugh, writing on “Falling revenue dings stocks,” on Oct 20, 2012, published in the Wall Street Journal (http://professional.wsj.com/article/SB10000872396390444592704578066933466076070.html?mod=WSJPRO_hpp_LEFTTopStories), identifies a key financial vulnerability: falling revenues across markets for United States reporting companies. Global economic slowdown is reducing corporate sales and squeezing corporate strategies. Linebaugh quotes data from Thomson Reuters that 100 companies of the S&P 500 index have reported declining revenue only 1 percent higher in Jun-Sep 2012 relative to Jun-Sep 2011 but about 60 percent of the companies are reporting lower sales than expected by analysts with expectation that revenue for the S&P 500 will be lower in Jun-Sep 2012 for the entities represented in the index. Results of US companies are likely repeated worldwide. Future company cash flows derive from investment projects. In IQ1980, real gross private domestic investment in the US was $933.1 billion of chained 2012 dollars, growing to $1,372.1 billion in IVQ1993 or 47.0 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm). Real gross private domestic investment in the US increased 7.6 percent from $2,653.1 billion in IVQ2007 to $2,854.9 billion in IIQ2020. Real private fixed investment increased 17.9 percent from $2,630.0 billion of chained 2012 dollars in IVQ2007 to $3,099.6 billion in IQ2020. Real gross private domestic investment fell at SAAR 46.2 percent in IIQ2020, and private fixed investment fell at SAAR 28.9 percent in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. Private fixed investment fell relative to IVQ2007 in all quarters preceding IVQ2012 and increased 0.8 percent in IIIQ2016, increasing 0.4 percent in IIQ2016 and increasing 0.5 percent in IQ2016. Private fixed investment increased 0.7 percent in IVQ2016. Private fixed investment increased 1.7 percent in IQ2017 and increased 0.4 percent in IIQ2017. Private fixed investment increased 0.3 percent in IIIQ2017 and increased 2.3 percent in IVQ2017. Private fixed investment increased 2.1 percent in IQ2018, increasing 1.1 percent in IIQ2018. Private fixed investment increased 0.2 percent in IIIQ2018, increasing 0.7 percent in IVQ2018. Private fixed investment increased 0.7 percent in IQ2019, decreasing 0.1 percent in IIQ2019. Private fixed investment increased 0.6 percent in IIIQ2019. Private fixed investment increased 0.2 percent in IVQ2019. Private fixed investment decreased 0.3 percent in IQ2020. Private fixed investment decreased 8.2 percent in IIQ2020. Growth of real private investment in Table IA1-2 is mediocre for all but four quarters from IIQ2011 to IQ2012. There is recent robust growth followed by sharp contraction in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The investment decision of United States corporations is fractured in the current economic cycle in preference of cash.
There are three aspects. First, there is fluctuation in corporate profits. Corporate profits decreased at $16.7 billion in IIIQ2019. Corporate profits increased at $64.8 billion in IVQ2019. Corporate profits decreased at $276.2 billion in IQ2020. Corporate profits decreased at $226.9 billion in IIQ2020 in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. Profits after tax with IVA and CCA increased at $5.2 billion in IIIQ2019. Profits after tax with IVA and CCA increased at $35.5 billion in IVQ2019. Profits after tax with IVA and CCA decreased at $219.4 billion in IQ2020. Profits after tax with IVA and CCA decreased at 210.3 percent in IIQ2020. Net dividends decreased at $20.8 billion in IIIQ2019. Net dividends increased at $7.8 billion in IVQ2019. Net dividends increased at $23.2 billion in IQ2020. Net dividends decreased at $8.3 billion in IIQ2020. Undistributed corporate profits increased at $26.1 billion in IIIQ2019. Undistributed profits increased at $27.7 billion in IVQ2019. Undistributed profits decreased at $242.7 billion in IQ2020. Undistributed corporate profits decreased at $202 billion in IIQ2020. Undistributed corporate profits swelled 28.8 percent from $138.0 billion in IQ2007 to $177.8 billion in IIQ2020 and changed signs from minus $4.3 billion in current dollars in IVQ2007. Net dividends decreased from $968.7 billion in IVQ2009 to $813.0 billion in IQ2020, increasing to $1,014.6 billion in IIQ2020, as corporations distributed dividends to halt decrease in stock valuations in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. Second, sharp and continuing strengthening of the dollar, with recent depreciation/fluctuations at the margin, is affecting balance sheets of US corporations with foreign operations (https://www.fasb.org/summary/stsum52.shtml) and the overall US economy. The bottom part of Table IA1-9 provides the breakdown of corporate profits with IVA and CCA in domestic industries and the rest of the world. Corporate profits with IVA and CCA decreased at $16.7 billion in IIIQ2019. Profits from domestic industries decreased at $25.0 billion and profits from nonfinancial business decreased at $18.0 billion. Profits from the rest of the world increased at $8.3 billion. Corporate profits with IVA and CCA increased at $64.8 billion in IVQ2019. Profits from domestic industries increased at $62.7 billion and profits from nonfinancial business increased at $46.0 billion. Profits from the rest of the world increased at $2.1 billion. Corporate profits with IVA and CCA decreased at $276.2 billion in IQ2020. Profits from domestic industries decreased at $232.7 billion and profits from nonfinancial business decreased at $190.5 billion. Profits from the rest of the world decreased at $43.5 billion. Corporate profits with IVA and CCA decreased at $226.9 billion in IIQ2020. Profits from domestic industries decreased at $130.6 billion and profits from nonfinancial business decreased at $170.1 billion. Profits from the rest of the world decreased at $96.2 billion. Total corporate profits with IVA and CCA were $1808.2 billion in IIQ2020 of which $1431.3 billion from domestic industries, or 79.2 percent of the total, and $376.9 billion, or 20.8 percent, from the rest of the world. Nonfinancial corporate profits of $960.6 billion account for 53.1 percent of the total. Third, there is reduction in the use of corporate cash for investment. Vipal Monga, David Benoit and Theo Francis, writing on “Companies send more cash back to shareholders,” published on May 26, 2015 in the Wall Street Journal (http://www.wsj.com/articles/companies-send-more-cash-back-to-shareholders-1432693805?tesla=y), use data of a study by Capital IQ conducted for the Wall Street Journal. This study shows that companies in the S&P 500 reduced investment in plant and equipment to median 29 percent of operating cash flow in 2013 from 33 percent in 2003 while increasing dividends and buybacks to median 36 percent in 2013 from 18 percent in 2003.
The basic valuation equation that is also used in capital budgeting postulates that the value of stocks or of an investment project is given by:
Where Rτ is expected revenue in the time horizon from τ =1 to T; Cτ denotes costs; and ρ is an appropriate rate of discount. In words, the value today of a stock or investment project is the net revenue, or revenue less costs, in the investment period from τ =1 to T discounted to the present by an appropriate rate of discount. In the current weak economy, revenues have been increasing more slowly than anticipated in investment plans. An increase in interest rates would affect discount rates used in calculations of present value, resulting in frustration of investment decisions. If V represents value of the stock or investment project, as ρ → ∞, meaning that interest rates increase without bound, then V → 0, or
declines. Equally, decline in expected revenue from the stock or project, Rτ, causes decline in valuation. Paul A. Samuelson (https://www.nobelprize.org/prizes/economic-sciences/1970/samuelson/biographical/) popularized the view of the elusive relation between stock markets and economic activity in an often-quoted phrase “the stock market has predicted nine of the last five recessions.” In the present of zero interest rates forever, valuations of risk financial assets are likely to differ from the performance of the overall economy. The interrelations of financial and economic variables prove difficult to analyze and measure.
Table VI-4, Stock Indexes, Commodities, Dollar and Ten-Year Treasury
Peak | Trough | ∆% to Trough | ∆% Peak to10/16/ /20 | ∆% Week 10/16/20 | ∆% Trough to 10/16/ 20 | |
DJIA | 4/26/ | 7/2/10 | -13.6 | 155.3 | 0.1 | 195.3 |
S&P 500 | 4/23/ | 7/20/ | -16.0 | 186.2 | 0.2 | 240.7 |
NYSE Finance | 4/15/ | 7/2/10 | -20.3 | 32.9 | -1.6 | 66.8 |
Dow Global | 4/15/ | 7/2/10 | -18.4 | 45.9 | -0.9 | 78.8 |
Asia Pacific | 4/15/ | 7/2/10 | -12.5 | NA | NA | NA |
Japan Nikkei Aver. | 4/05/ | 8/31/ | -22.5 | 105.5 | -0.9 | 165.3 |
China Shang. | 4/15/ | 7/02 | -24.7 | 5.4 | 2.0 | 40.0 |
STOXX 50 | 4/15/10 | 7/2/10 | -15.3 | 7.7 | -1.1 | 27.2 |
DAX | 4/26/ | 5/25/ | -10.5 | 103.9 | -1.1 | 127.7 |
Dollar | 11/25 2009 | 6/7 | 21.2 | 22.6 | 1.0 | 1.7 |
DJ UBS Comm. | 1/6/ | 7/2/10 | -14.5 | NA | NA | NA |
10-Year T Note | 4/5/ | 4/6/10 | 3.986 | 2.784 | 2.658 | 0.738 |
T: trough; Dollar: positive sign appreciation relative to euro (less dollars paid per euro), negative sign depreciation relative to euro (more dollars paid per euro)
Source: http://professional.wsj.com/mdc/page/marketsdata.html?mod=WSJ_hps_marketdata
Bernanke (2010WP) and Yellen (2011AS) reveal the emphasis of monetary policy on the impact of the rise of stock market valuations in stimulating consumption by wealth effects on household confidence. Table VI-5 shows a gain by Apr 29, 2011 in the DJIA of 14.3 percent and of the S&P 500 of 12.5 percent since Apr 26, 2010, around the time when sovereign risk issues in Europe began to be acknowledged in financial risk asset valuations. The last row of Table VI-5 for Oct 16, 2020 shows that the S&P 500 is now 187.4 percent above the Apr 26, 2010 level and the DJIA is 155.3 percent above the level on Apr 26, 2010. Multiple rounds of risk aversion eroded earlier gains, showing that risk aversion can destroy market value even with zero interest rates. Relaxed risk aversion has contributed to recovery of valuations. Much the same as zero interest rates and quantitative easing have not had any effects in recovering economic activity while distorting financial markets and resources.
Table VI-5, Percentage Changes of DJIA and S&P 500 in Selected Dates
∆% DJIA from prior date | ∆% DJIA from | ∆% S&P 500 from prior date | ∆% S&P 500 from | |
Apr 26, 2010 | ||||
May 06/10 | -6.1 | -6.1 | -6.9 | -6.9 |
May 26/10 | -5.2 | -10.9 | -5.4 | -11.9 |
Jun 08/10 | -1.2 | -11.3 | 2.1 | -12.4 |
Jul 02/10 | -2.6 | -13.6 | -3.8 | -15.7 |
Aug 09/10 | 10.5 | -4.3 | 10.3 | -7.0 |
Aug 31/10 | -6.4 | -10.6 | -6.9 | -13.4 |
Nov 5/10 | 14.2 | 2.1 | 16.8 | 1.0 |
Nov 30/10 | -3.8 | -3.8 | -3.7 | -2.6 |
Dec 17/10 | 4.4 | 2.5 | 5.3 | 2.6 |
Dec 23/10 | 0.7 | 3.3 | 1.0 | 3.7 |
Dec 31/10 | 0.03 | 3.3 | 0.0 | 3.8 |
Jan 7, 2011 | 0.8 | 4.2 | 1.1 | 4.9 |
Jan 14/11 | 0.9 | 5.2 | 1.7 | 6.7 |
Jan 21/11 | 0.7 | 5.9 | -0.8 | 5.9 |
Jan 28/11 | -0.4 | 5.5 | -0.5 | 5.3 |
Feb 04/11 | 2.3 | 7.9 | 2.7 | 8.1 |
Feb 11/11 | 1.5 | 9.5 | 1.4 | 9.7 |
Feb 18/11 | 0.9 | 10.6 | 1.0 | 10.8 |
Feb 25/11 | -2.1 | 8.3 | -1.7 | 8.9 |
Mar 4/11 | 0.3 | 8.6 | 0.1 | 9.0 |
Mar 11/11 | -1.0 | 7.5 | -1.3 | 7.6 |
Mar 18/11 | -1.5 | 5.8 | -1.9 | 5.5 |
Mar 25/11 | 3.1 | 9.1 | 2.7 | 8.4 |
Apr 01/11 | 1.3 | 10.5 | 1.4 | 9.9 |
Apr 08/11 | 0.03 | 10.5 | -0.3 | 9.6 |
Apr 15/11 | -0.3 | 10.1 | -0.6 | 8.9 |
Apr 22/11 | 1.3 | 11.6 | 1.3 | 10.3 |
Apr 29/11 | 2.4 | 14.3 | 1.9 | 12.5 |
May 06/11 | -1.3 | 12.8 | -1.7 | 10.6 |
May 13/11 | -0.3 | 12.4 | -0.2 | 10.4 |
May 20/11 | -0.7 | 11.7 | -0.3 | 10.0 |
May 27/11 | -0.6 | 11.0 | -0.2 | 9.8 |
Jun 03/11 | -2.3 | 8.4 | -2.3 | 7.3 |
Jun 10/11 | -1.6 | 6.7 | -2.2 | 4.9 |
Jun 17/11 | 0.4 | 7.1 | 0.04 | 4.9 |
Jun 24/11 | -0.6 | 6.5 | -0.2 | 4.6 |
Jul 01/11 | 5.4 | 12.3 | 5.6 | 10.5 |
Jul 08/11 | 0.6 | 12.9 | 0.3 | 10.9 |
Jul 15/11 | -1.4 | 11.4 | -2.1 | 8.6 |
Jul 22/11 | 1.6 | 13.2 | 2.2 | 10.9 |
Jul 29/11 | -4.2 | 8.4 | -3.9 | 6.6 |
Aug 05/11 | -5.8 | 2.1 | -7.2 | -1.0 |
Aug 12/11 | -1.5 | 0.6 | -1.7 | -2.7 |
Aug 19/11 | -4.0 | -3.5 | -4.7 | -7.3 |
Aug 26/11 | 4.3 | 0.7 | 4.7 | -2.9 |
Sep 02/11 | -0.4 | 0.3 | -0.2 | -3.1 |
Sep 09/11 | -2.2 | -1.9 | -1.7 | -4.8 |
Sep 16/11 | 4.7 | 2.7 | 5.4 | 0.3 |
Sep 23/11 | -6.4 | -3.9 | -6.5 | -6.2 |
Sep 30/11 | 1.3 | -2.6 | -0.4 | -6.7 |
Oct 7/11 | 1.7 | -0.9 | 2.1 | -4.7 |
Oct 14/11 | 4.9 | 3.9 | 5.9 | 1.0 |
Oct 21/11 | 1.4 | 5.4 | 1.1 | 2.2 |
Oct 28/11 | 3.6 | 9.2 | 3.8 | 6.0 |
Nov 04/11 | -2.0 | 6.9 | -2.5 | 3.4 |
Nov 11/11 | 1.4 | 8.5 | 0.8 | 4.3 |
Nov 18/11 | -2.9 | 5.3 | -3.8 | 0.3 |
Nov 25/11 | -4.8 | 0.2 | -4.7 | -4.4 |
Dec 02/11 | 7.0 | 7.3 | 7.4 | 2.7 |
Dec 09/11 | 1.4 | 8.7 | 0.9 | 3.6 |
Dec 16/11 | -2.6 | 5.9 | -2.8 | 0.6 |
Dec 23/11 | 3.6 | 9.7 | 3.7 | 4.4 |
Dec 30/11 | -0.6 | 9.0 | -0.6 | 3.8 |
Jan 06 2012 | 1.2 | 10.3 | 1.6 | 5.4 |
Jan 13/12 | 0.5 | 10.9 | 0.9 | 6.4 |
Jan 20/12 | 2.4 | 13.5 | 2.0 | 8.5 |
Jan 27/12 | -0.5 | 13.0 | 0.1 | 8.6 |
Feb 3/12 | 1.6 | 14.8 | 2.2 | 11.0 |
Feb 10/12 | -0.5 | 14.2 | -0.2 | 10.8 |
Feb 17/12 | 1.2 | 15.6 | 1.4 | 12.3 |
Feb 24/12 | 0.3 | 15.9 | 0.3 | 12.7 |
Mar 2/12 | 0.0 | 15.8 | 0.3 | 13.0 |
Mar 9/12 | -0.4 | 15.3 | 0.1 | 13.1 |
Mar 16/12 | 2.4 | 18.1 | 2.4 | 15.9 |
Mar 23/12 | -1.1 | 16.7 | -0.5 | 15.3 |
Mar 30/12 | 1.0 | 17.9 | 0.8 | 16.2 |
Apr 6/12 | -1.1 | 16.6 | -0.7 | 15.3 |
Apr 13/12 | -1.6 | 14.7 | -2.0 | 13.1 |
Apr 20/12 | 1.4 | 16.3 | 0.6 | 13.7 |
Apr 27/12 | 1.5 | 18.1 | 1.8 | 15.8 |
May 4/12 | -1.4 | 16.4 | -2.3 | 12.9 |
May 11/12 | -1.7 | 14.4 | -1.1 | 11.7 |
May 18/12 | -3.5 | 10.4 | -4.3 | 6.4 |
May 25/12 | 0.7 | 11.2 | 1.7 | 8.7 |
Jun 01/12 | -2.7 | 8.2 | -3.0 | 5.4 |
Jun 08/12 | 3.6 | 12.0 | 3.7 | 9.4 |
Jun 15/12 | 1.7 | 13.9 | 1.3 | 10.8 |
Jun 22/12 | -1.0 | 12.8 | -0.6 | 10.1 |
Jun 29/12 | 1.9 | 14.9 | 2.0 | 12.4 |
Jul 06/12 | -0.8 | 14.0 | -0.5 | 11.8 |
Jul 13/12 | 0.0 | 14.0 | 0.2 | 11.9 |
Jul 20/12 | 0.4 | 14.4 | 0.4 | 12.4 |
Jul 27/12 | 2.0 | 16.7 | 1.7 | 14.3 |
Aug 03/12 | 0.2 | 16.9 | 0.4 | 14.8 |
Aug 10/12 | 0.9 | 17.9 | 1.1 | 16.0 |
Aug 17/12 | 0.5 | 18.5 | 0.9 | 17.0 |
Aug 24/12 | -0.9 | 17.4 | -0.5 | 16.4 |
Aug 31/12 | -0.5 | 16.8 | -0.3 | 16.0 |
Sep 07/12 | 1.6 | 18.8 | 2.2 | 18.6 |
Sep 14/12 | 2.2 | 21.3 | 1.90 | 20.9 |
Sep 21/12 | -0.1 | 21.2 | -0.4 | 20.5 |
Sep 28/12 | -1.0 | 19.9 | -1.3 | 18.9 |
Oct 05/12 | 1.3 | 21.5 | 1.4 | 20.5 |
Oct 12/12 | -2.1 | 18.9 | -2.2 | 17.9 |
Oct 19/12 | 0.1 | 19.1 | 0.3 | 18.3 |
Oct 26/12 | -1.8 | 17.0 | -1.5 | 16.5 |
Nov 02/12 | -0.1 | 16.9 | 0.2 | 16.7 |
Nov 09/12 | -2.1 | 14.4 | -2.4 | 13.8 |
Nov 16/12 | -1.8 | 12.3 | -1.4 | 12.2 |
Nov 23/12 | 3.3 | 16.1 | 3.6 | 16.3 |
Nov 30/12 | 0.1 | 16.2 | 0.5 | 16.8 |
Dec 07/12 | 1.0 | 17.4 | 0.1 | 17.0 |
Dec 14/12 | -0.2 | 17.2 | -0.3 | 16.6 |
Dec 21/12 | 0.4 | 17.7 | 1.2 | 18.0 |
Dec 28/12 | -1.9 | 15.5 | -1.9 | 15.7 |
Jan 04, 2013 | 3.8 | 19.9 | 4.6 | 21.0 |
Jan 11/13 | 0.4 | 20.4 | 0.4 | 21.5 |
Jan 18/13 | 1.2 | 21.8 | 0.9 | 22.6 |
Jan 25/13 | 1.8 | 24.0 | 1.1 | 24.0 |
Feb 01/13 | 0.8 | 25.0 | 0.7 | 24.8 |
Feb 08/13 | -0.1 | 24.9 | 0.3 | 25.2 |
Feb 15/13 | -0.1 | 24.8 | 0.1 | 25.4 |
Feb 22/13 | 0.1 | 24.9 | -0.3 | 25.0 |
Mar 1/13 | 0.6 | 25.7 | 0.2 | 25.3 |
Mar 8/13 | 2.2 | 28.5 | 2.2 | 28.0 |
Mar 15/13 | 0.8 | 29.5 | 0.6 | 28.8 |
Mar 22/13 | 0.0 | 29.5 | -0.2 | 28.5 |
Mar 29/13 | 0.5 | 30.1 | 0.8 | 29.5 |
Apr 05/13 | -0.1 | 30.0 | -1.0 | 28.2 |
Apr 12/13 | 2.1 | 32.7 | 2.3 | 31.1 |
Apr 19/13 | -2.1 | 29.8 | -2.1 | 28.3 |
Aug 26/13 | 1.1 | 31.3 | 1.7 | 30.5 |
May 03/13 | 1.8 | 33.6 | 2.0 | 33.2 |
May 10/13 | 1.0 | 34.9 | 1.2 | 34.8 |
May 17/13 | 1.6 | 37.0 | 2.1 | 37.6 |
May 24/13 | -0.3 | 36.6 | -1.1 | 36.1 |
May 31/13 | -1.2 | 34.9 | -1.1 | 34.5 |
Jun 07/13 | 0.9 | 36.1 | 0.8 | 35.6 |
Jun 14/13 | -1.2 | 34.5 | -0.9 | 34.4 |
Jun 21/13 | -1.8 | 32.1 | -2.2 | 31.4 |
Jun 28/13 | 0.7 | 33.1 | 0.9 | 32.5 |
Jul 05/13 | 1.5 | 35.1 | 1.6 | 34.6 |
Jul 12/13 | 2.2 | 38.0 | 3.0 | 38.6 |
Jul 19/13 | 0.5 | 38.7 | 0.7 | 39.6 |
Jul 26/13 | 0.1 | 38.9 | 0.0 | 39.6 |
Aug 02/13 | 0.6 | 39.7 | 1.1 | 41.1 |
Aug 09/13 | -1.5 | 37.7 | -1.1 | 39.6 |
Aug 16/13 | -2.2 | 34.6 | -2.1 | 36.6 |
Aug 23/13 | -0.5 | 34.0 | 0.5 | 37.2 |
Aug 30/13 | -1.3 | 32.2 | -1.8 | 34.7 |
Sep 06/13 | 0.8 | 33.2 | 1.4 | 36.6 |
Sep 13/13 | 3.0 | 37.2 | 2.0 | 39.3 |
Sep 20/13 | 0.5 | 37.9 | 1.3 | 41.1 |
Sep 27/13 | -1.2 | 36.2 | -1.1 | 39.6 |
Oct 04/13 | -1.2 | 34.5 | -0.1 | 39.5 |
Oct 11/13 | 1.1 | 36.0 | 0.8 | 40.5 |
Oct 18/13 | 1.1 | 37.4 | 2.4 | 43.9 |
Oct 25/13 | 1.1 | 39.0 | 0.9 | 45.2 |
Nov 01/13 | 0.3 | 39.4 | 0.1 | 45.3 |
Nov 08/13 | 0.9 | 40.7 | 0.5 | 46.1 |
Nov 15/13 | 1.3 | 42.5 | 1.6 | 48.4 |
Nov 22/13 | 0.6 | 43.4 | 0.4 | 48.9 |
Nov 29/13 | 0.1 | 43.6 | 0.1 | 49.0 |
Dec 06/13 | -0.4 | 43.0 | 0.0 | 48.9 |
Dec 13/13 | -1.7 | 40.6 | -1.6 | 46.5 |
Dec 20/13 | 3.0 | 44.8 | 2.4 | 50.0 |
Dec 27/13 | 1.6 | 47.1 | 1.3 | 51.9 |
Jan 03, 2014 | -0.1 | 47.0 | -0.5 | 79.1 |
Jan 10/14 | -0.2 | 46.7 | 0.6 | 52.0 |
Jan 17/14 | 0.1 | 46.9 | -0.2 | 51.7 |
Jan 24/14 | -3.5 | 41.7 | -2.6 | 47.7 |
Jan 31/14 | -1.1 | 40.1 | -0.4 | 47.1 |
Feb 7/14 | 0.6 | 41.0 | 0.8 | 48.3 |
Feb 14/14 | 2.3 | 44.2 | 2.3 | 51.7 |
Feb 21/14 | -0.3 | 43.7 | -0.1 | 51.5 |
Feb 28/14 | 1.4 | 45.7 | 1.3 | 53.4 |
Mar 7/14 | 0.8 | 46.8 | 1.0 | 54.9 |
Mar 14/14 | -2.4 | 43.4 | -2.0 | 51.9 |
Mar 21/14 | 1.5 | 45.5 | 1.4 | 54.0 |
Mar 28/14 | 0.1 | 45.7 | -0.5 | 53.3 |
Apr 04/14 | 0.5 | 46.5 | 0.4 | 53.9 |
Apr 11/14 | -2.4 | 43.0 | -2.6 | 49.8 |
Apr 17/14 | 2.4 | 46.4 | 2.7 | 53.9 |
Apr 25/14 | -0.3 | 46.0 | -0.1 | 53.7 |
May 02/14 | 0.9 | 47.4 | 1.0 | 55.2 |
May 09/14 | 0.4 | 48.0 | -0.1 | 55.0 |
May 16, 14 | -0.6 | 47.2 | 0.0 | 54.9 |
May 23, 14 | 0.7 | 48.2 | 1.2 | 56.8 |
May 30, 14 | 0.7 | 49.2 | 1.2 | 58.7 |
Jun 06, 14 | 1.2 | 51.0 | 1.3 | 60.8 |
Jun 13, 14 | -0.9 | 49.7 | -0.7 | 59.7 |
Jun 20, 14 | 1.0 | 51.2 | 1.4 | 61.9 |
Jun 27, 14 | -0.6 | 50.4 | -0.1 | 61.8 |
Jul 04, 14 | 1.3 | 52.3 | 1.2 | 63.8 |
Jul 11, 14 | -0.7 | 51.2 | -0.9 | 62.3 |
Jul 18, 14 | 0.9 | 52.6 | 0.5 | 63.2 |
Jul 25, 14 | -0.8 | 51.4 | 0.0 | 63.2 |
Aug 1, 14 | -2.8 | 47.2 | -2.7 | 58.8 |
Aug 8, 14 | 0.4 | 47.7 | 0.3 | 59.4 |
Aug 15, 14 | 0.7 | 48.7 | 1.2 | 61.3 |
Aug 22, 14 | 2.0 | 51.7 | 1.7 | 64.1 |
Aug 29, 14 | 0.6 | 52.6 | 0.8 | 65.3 |
Sep 5, 14 | 0.2 | 52.9 | 0.2 | 65.6 |
Sep 12, 14 | -0.9 | 51.6 | -1.1 | 63.8 |
Sep 19, 14 | 1.7 | 54.2 | 1.3 | 65.9 |
Sep 26,14 | -1.0 | 52.7 | -1.4 | 63.6 |
Oct 3, 14 | -0.6 | 51.8 | -0.8 | 62.4 |
Oct 10, 14 | -2.7 | 47.6 | -3.1 | 57.3 |
Oct 17, 14 | -1.0 | 46.2 | -1.0 | 55.7 |
Oct 24, 14 | 2.6 | 50.0 | 4.1 | 62.1 |
Oct 31, 14 | 3.5 | 55.2 | 2.7 | 66.5 |
Nov 7, 14 | 1.1 | 56.8 | 0.7 | 67.6 |
Nov 14, 14 | 0.3 | 57.4 | 0.4 | 68.3 |
Nov 21,14 | 1.0 | 58.9 | 1.2 | 70.2 |
Nov 28, 14 | 0.1 | 59.1 | 0.2 | 70.6 |
Dec 5, 14 | 0.7 | 60.3 | 0.4 | 71.2 |
Dec 12, 14 | -3.8 | 54.2 | -3.5 | 65.2 |
Dec 19, 14 | 3.0 | 58.9 | 3.4 | 70.8 |
Dec 26, 14 | 1.4 | 61.1 | 0.9 | 72.3 |
Jan 02, 2015 | -1.2 | 59.2 | -1.5 | 69.8 |
Jan 09, 15 | -0.5 | 58.3 | -0.7 | 68.7 |
Jan 16, 15 | -1.3 | 56.3 | -1.2 | 66.6 |
Jan 23, 15 | 0.9 | 57.7 | 1.6 | 69.3 |
Jan 30, 15 | -2.9 | 53.2 | -2.8 | 64.6 |
Feb 06, 15 | 3.8 | 59.1 | 3.0 | 69.6 |
Feb 13, 15 | 1.1 | 60.8 | 2.0 | 73.0 |
Feb 20, 15 | 0.7 | 61.9 | 0.6 | 74.1 |
Feb 27, 15 | 0.0 | 61.8 | -0.3 | 73.6 |
Feb 6, 15 | -1.5 | 59.4 | -1.6 | 70.9 |
Feb 13 15 | -0.6 | 58.4 | -0.9 | 69.4 |
Feb 20, 15 | 2.1 | 61.8 | 2.7 | 73.9 |
Feb 27, 15 | -2.3 | 58.1 | -2.2 | 70.0 |
Apr 03, 15 | 0.3 | 58.5 | 0.3 | 70.5 |
Apr 10, 15 | 1.7 | 61.2 | 1.7 | 73.4 |
Apr 17, 15 | -1.3 | 59.1 | -1.0 | 71.7 |
Apr 24, 2015 | 1.4 | 61.4 | 1.8 | 74.7 |
May 1, 2015 | -0.3 | 60.9 | -0.4 | 73.9 |
May 8, 2015 | 0.9 | 62.3 | 0.4 | 74.6 |
May 15, 2015 | 0.4 | 63.1 | 0.3 | 75.1 |
May 22, 2015 | -0.2 | 62.7 | 0.2 | 75.4 |
May 29, 2015 | -1.2 | 60.7 | -0.9 | 73.9 |
Jun 5, 2015 | -0.9 | 59.3 | -0.7 | 72.7 |
Jun 12, 2015 | 0.3 | 59.7 | 0.1 | 72.8 |
Jun 19, 2015 | 0.7 | 60.8 | 0.8 | 74.1 |
Jun 26, 2015 | -0.4 | 60.2 | -0.4 | 73.4 |
Jul 3, 2015 | -1.2 | 58.2 | -1.2 | 71.3 |
Jul 10, 2015 | 0.2 | 58.5 | 0.0 | 71.3 |
Jul 17, 2015 | 1.8 | 61.4 | 2.4 | 75.5 |
Jul 24, 2015 | -2.9 | 56.8 | -2.2 | 71.6 |
Jul 31, 2015 | 0.7 | 57.9 | 1.2 | 73.6 |
Aug 7, 2015 | -1.8 | 55.0 | -1.2 | 71.4 |
Aug 14, 2015 | 0.6 | 56.0 | 0.7 | 72.6 |
Aug 21, 2015 | -5.8 | 46.9 | -5.8 | 62.6 |
Aug 28, 2015 | 1.1 | 48.5 | 0.9 | 64.1 |
Sep 4, 2015 | -3.2 | 43.7 | -3.4 | 58.5 |
Sep 11, 2015 | 2.1 | 46.7 | 2.1 | 61.8 |
Sep 18, 2015 | -0.3 | 46.2 | -0.2 | 61.5 |
Sep 25, 2015 | -0.4 | 45.6 | -1.4 | 59.3 |
Oct 2, 2015 | 1.0 | 47.0 | 1.0 | 70.1 |
Oct 9, 2015 | 3.7 | 52.5 | 3.3 | 66.2 |
Oct 16, 2015 | 0.8 | 53.6 | 0.9 | 67.7 |
Oct 23, 2015 | 2.5 | 57.5 | 2.1 | 71.2 |
Oct 30, 2015 | 0.1 | 57.6 | 0.2 | 71.6 |
Nov 6, 2015 | 0.4 | 59.8 | 1.0 | 73.2 |
Nov 13, 2015 | -3.7 | 53.9 | -3.6 | 66.9 |
Nov 20, 2015 | 3.4 | 59.1 | 3.3 | 72.4 |
Nov 27, 2015 | -0.1 | 58.8 | 0.0 | 72.4 |
Dec 4, 2015 | 0.3 | 59.3 | 0.1 | 72.6 |
Dec 11, 2015 | -3.3 | 54.1 | -3.8 | 66.0 |
Dec 18, 2015 | -0.8 | 52.9 | -0.3 | 65.5 |
Dec 23, 2015 | 2.5 | 56.6 | 2.8 | 70.0 |
Dec 31, 2015 | -0.7 | 55.5 | -0.8 | 68.6 |
Jan 08, 2016 | -6.2 | 45.9 | -6.0 | 58.6 |
Jan 15, 2016 | -2.2 | 42.7 | -2.2 | 55.1 |
Jan 22, 2016 | 0.7 | 43.6 | 1.4 | 57.3 |
Jan 29, 2016 | 2.3 | 47.0 | 1.7 | 60.1 |
Feb 05, 2016 | -1.6 | 44.6 | -3.1 | 55.1 |
Feb 12, 2016 | -1.4 | 42.6 | -0.8 | 53.9 |
Feb 19, 2016 | 2.6 | 46.3 | 2.8 | 58.2 |
Feb 26, 2016 | 1.5 | 48.5 | 1.6 | 60.7 |
Mar 04, 2016 | 2.2 | 51.8 | 2.7 | 65.0 |
Mar 11, 2016 | 1.2 | 53.6 | 1.1 | 66.8 |
Mar 18, 2016 | 2.3 | 57.1 | 1.4 | 69.1 |
Mar 25, 2016 | -0.5 | 56.3 | -0.7 | 68.0 |
Apr 01, 2016 | 1.6 | 58.8 | 1.8 | 71.0 |
Apr 08, 2016 | -1.2 | 56.9 | -1.2 | 68.9 |
Apr 15, 2016 | 1.8 | 59.7 | 1.6 | 71.7 |
Apr 22, 2016 | 0.6 | 60.7 | 0.5 | 72.6 |
Apr 29, 2016 | -1.3 | 58.6 | -1.3 | 70.4 |
May 6, 2016 | -0.2 | 58.3 | -0.4 | 69.7 |
May 13, 2016 | -1.2 | 56.5 | -0.5 | 68.9 |
May 20, 2016 | -0.2 | 56.2 | 0.3 | 69.3 |
May 27, 2016 | 2.1 | 59.5 | 2.3 | 73.2 |
Jun 03, 2016 | -0.4 | 58.9 | 0.0 | 73.2 |
Jun 10, 2016 | 0.3 | 59.4 | -0.1 | 72.9 |
Jun 17, 2016 | -1.1 | 57.7 | -1.2 | 70.9 |
Jun 24, 2016 | -1.6 | 55.3 | -1.6 | 68.1 |
Jul 01, 2016 | 3.2 | 60.2 | 3.2 | 73.5 |
Jul 08, 2016 | 1.1 | 62.0 | 1.3 | 75.7 |
Jul 15, 2016 | 2.0 | 65.3 | 1.5 | 78.4 |
Jul 22, 2016 | 0.3 | 65.7 | 0.6 | 79.5 |
Jul 29, 2016 | -0.7 | 64.5 | -0.1 | 79.3 |
Aug 05, 2016 | 0.6 | 65.5 | 0.4 | 80.1 |
Aug 12, 2016 | 0.2 | 65.8 | 0.1 | 80.2 |
Aug 19, 2016 | -0.1 | 65.6 | 0.0 | 80.2 |
Aug 26, 2016 | -0.8 | 64.2 | -0.7 | 79.0 |
Sep 02, 2016 | 0.5 | 65.0 | 0.5 | 79.9 |
Sep 09, 2016 | -2.2 | 61.4 | -2.4 | 75.6 |
Sep 16, 2016 | 0.2 | 61.7 | 0.5 | 76.5 |
Sep 23, 2016 | 0.8 | 63.0 | 1.2 | 78.6 |
Sep 30, 2016 | 0.3 | 63.4 | 0.2 | 78.9 |
Oct 07, 2016 | -0.4 | 62.8 | -0.7 | 77.7 |
Oct 14, 2016 | -0.6 | 61.9 | -1.0 | 76.0 |
Oct 21, 2016 | 0.0 | 61.9 | 0.4 | 87.3 |
Oct 28, 2016 | 0.1 | 62.1 | -0.7 | 75.4 |
Nov 04, 2016 | -1.5 | 59.6 | -1.9 | 72.0 |
Nov 11, 2016 | 5.4 | 68.2 | 3.8 | 78.6 |
Nov 18, 2016 | 0.1 | 68.4 | 0.8 | 94.8 |
Nov 25, 2016 | 1.5 | 70.9 | 1.4 | 82.6 |
Dec 02, 2016 | 0.1 | 71.1 | -1.0 | 80.8 |
Dec 09, 2016 | 3.1 | 76.3 | 3.1 | 86.4 |
Dec 16, 2016 | 0.4 | 77.1 | -0.1 | 86.3 |
Dec 23, 2016 | 0.5 | 77.9 | 0.3 | 86.8 |
Dec 30, 2016 | -0.9 | 76.4 | -1.1 | 84.7 |
Jan 06, 2017 | 1.0 | 78.2 | 1.7 | 87.9 |
Jan 13, 2017 | -0.4 | 77.5 | -0.1 | 87.7 |
Jan 20, 2017 | -0.3 | 76.9 | -0.1 | 122.1 |
Jan 27, 2017 | 1.3 | 79.3 | 1.0 | 89.3 |
Feb 03, 2017 | -0.1 | 79.1 | 0.1 | 89.5 |
Feb 10, 2017 | 1.0 | 80.9 | 0.8 | 91.1 |
Feb 17, 2017 | 1.7 | 84.1 | 1.5 | 94.0 |
Feb 24, 2017 | 1.0 | 85.8 | 0.7 | 95.3 |
Mar 03, 2017 | 0.9 | 87.5 | 0.7 | 96.6 |
Mar 10, 2017 | -0.5 | 86.5 | -0.4 | 95.8 |
Mar 17, 2017 | 0.1 | 86.7 | 0.2 | 96.2 |
Mar 24, 2017 | -1.5 | 83.8 | -1.4 | 93.4 |
Mar 31, 2017 | 0.3 | 84.4 | 0.8 | 94.9 |
Apr 07, 2017 | 0.0 | 84.3 | -0.3 | 94.3 |
Apr 14, 2017 | -1.0 | 82.5 | -1.1 | 92.1 |
Apr 21, 2017 | 0.5 | 83.4 | 0.8 | 93.8 |
Apr 28, 2017 | 1.9 | 86.9 | 1.5 | 96.7 |
May 05, 2017 | 0.3 | 87.5 | 0.6 | 98.0 |
May 12, 2017 | -0.5 | 86.5 | -0.3 | 97.3 |
Mar 19, 2017 | -0.4 | 85.7 | -0.4 | 96.5 |
Mar 26, 2017 | 1.3 | 88.1 | 1.4 | 99.3 |
Jun 02, 2017 | 0.6 | 89.3 | 1.0 | 101.2 |
Jun 09, 2017 | 0.3 | 89.8 | -0.3 | 100.6 |
Jun 16, 2017 | 0.5 | 90.8 | 0.1 | 100.7 |
Jun 23, 2017 | 0.0 | 90.9 | 0.2 | 101.2 |
Jun 30, 2017 | -0.2 | 90.5 | -0.6 | 99.9 |
Jul 07, 2017 | 0.3 | 91.1 | 0.1 | 100.1 |
Jul 14, 2017 | 1.0 | 93.1 | 1.4 | 102.9 |
Jul 21, 2017 | -0.3 | 92.6 | 0.5 | 104.0 |
Jul 28, 2017 | 1.2 | 94.8 | 0.0 | 104.0 |
Aug 04, 2017 | 1.2 | 97.2 | 0.2 | 104.4 |
Aug 11. 2017 | -1.1 | 95.1 | -1.4 | 101.4 |
Aug 18, 2017 | -0.8 | 93.4 | -0.6 | 100.1 |
Aug 25, 2017 | 0.6 | 94.7 | 0.7 | 101.6 |
Sep 01, 2017 | 0.8 | 96.2 | 1.4 | 104.3 |
Sep 08, 2017 | -0.9 | 94.5 | -0.6 | 103.1 |
Sep 15, 2017 | 2.2 | 98.7 | 1.6 | 106.3 |
Sep 22, 2017 | 0.4 | 99.5 | 0.1 | 106.4 |
Sep 29, 2017 | 0.2 | 100.0 | 0.7 | 107.9 |
Oct 06, 2017 | 1.6 | 103.2 | 1.2 | 110.3 |
Oct 13, 2017 | 0.4 | 104.1 | 0.2 | 110.6 |
Oct 20, 2017 | 2.0 | 108.2 | 0.9 | 112.5 |
Oct 27, 2017 | 0.5 | 109.1 | 0.2 | 113.0 |
Nov 03, 2017 | 0.4 | 110.1 | 0.3 | 113.5 |
Nov 10, 2017 | -0.5 | 109.0 | -0.2 | 113.1 |
Nov 17, 2017 | -0.3 | 108.5 | -0.1 | 112.8 |
Nov 24, 2017 | 0.9 | 110.2 | 0.9 | 114.7 |
Dec 01, 2017 | 2.9 | 116.3 | 1.5 | 118.0 |
Dec 08, 2017 | 0.4 | 117.1 | 0.4 | 118.8 |
Dec 15, 2017 | 1.3 | 120.0 | 0.9 | 120.8 |
Dec 22, 2017 | 0.4 | 120.9 | 0.3 | 121.4 |
Dec 29, 2017 | -0.1 | 120.6 | -0.4 | 120.6 |
Jan 05, 2018 | 2.3 | 125.8 | 2.6 | 126.3 |
Jan 12, 2018 | 2.0 | 130.3 | 1.6 | 129.9 |
Jan 19, 2018 | 1.0 | 132.7 | 0.9 | 131.9 |
Jan 26, 2018 | 2.1 | 137.5 | 2.2 | 137.0 |
Feb 02, 2018 | -4.1 | 127.8 | -3.9 | 127.9 |
Feb 09, 2018 | -5.2 | 115.9 | -5.2 | 116.1 |
Feb 16, 2018 | 4.3 | 125.1 | 4.3 | 125.4 |
Feb 23, 2018 | 0.4 | 125.9 | 0.6 | 126.7 |
Mar 02, 2018 | -3.0 | 119.0 | -2.0 | 122.0 |
Mar 09, 2018 | 3.3 | 126.1 | 3.5 | 129.9 |
Mar 16, 2018 | -1.5 | 122.6 | -1.2 | 127.1 |
Mar 23, 2018 | -5.7 | 110.0 | -6.0 | 113.5 |
Mar 30, 2018 | 2.4 | 115.1 | 2.0 | 117.9 |
Apr 06, 2018 | -0.7 | 113.6 | -1.4 | 114.9 |
Apr 13, 2018 | 1.8 | 117.4 | 2.0 | 119.2 |
Apr 20, 2018 | 0.4 | 118.3 | 0.5 | 120.3 |
Apr 27, 2018 | -0.6 | 117.0 | 0.0 | 120.3 |
May 04, 2018 | -0.2 | 116.5 | -0.2 | 119.7 |
May 11, 2018 | 2.3 | 121.6 | 2.4 | 125.1 |
May 18, 2018 | -0.5 | 120.6 | -0.5 | 123.8 |
May 25, 2018 | 0.2 | 120.9 | 0.3 | 124.5 |
Jun 01, 2018 | -0.5 | 119.9 | 0.5 | 125.6 |
Jun 08, 2018 | 2.8 | 125.9 | 2.4 | 130.9 |
Jun 15, 2018 | -0.9 | 123.9 | -0.7 | 129.3 |
Jun 22, 2018 | -2.0 | 119.4 | -0.9 | 127.3 |
Jun 29, 2018 | -1.3 | 116.6 | -1.3 | 124.3 |
Jul 06, 2018 | 0.8 | 118.3 | 1.5 | 127.7 |
Jul 13, 2018 | 2.3 | 123.3 | 1.5 | 131.1 |
Jul 20, 2018 | 0.2 | 123.6 | 0.0 | 131.2 |
Jul 27, 2018 | 1.6 | 127.1 | 0.6 | 132.6 |
Aug 03, 2018 | 0.0 | 127.2 | 0.8 | 134.3 |
Aug 10, 2018 | -0.6 | 125.9 | -0.2 | 133.8 |
Aug 17, 2018 | 1.4 | 129.1 | 0.6 | 135.1 |
Aug 24, 2018 | 0.5 | 130.2 | 0.9 | 137.2 |
Aug 31, 2018 | 0.7 | 131.7 | 0.9 | 139.4 |
Sep 07, 2018 | -0.2 | 131.3 | -1.0 | 136.9 |
Sep 14, 2018 | 0.9 | 133.4 | 1.2 | 139.7 |
Sep 21, 2018 | 2.3 | 138.7 | 0.8 | 141.7 |
Sep 28, 2018 | -1.1 | 136.1 | -0.5 | 140.4 |
Oct 05, 2018 | 0.0 | 136.0 | -1.0 | 138.1 |
Oct 12, 2018 | -4.2 | 126.1 | -4.1 | 128.3 |
Oct 19, 2018 | 0.4 | 127.1 | 0.0 | 128.4 |
Oct 26, 2018 | -3.0 | 120.3 | -3.9 | 119.4 |
Nov 02, 2018 | 2.4 | 125.5 | 2.4 | 124.7 |
Nov 09, 2018 | 2.8 | 131.9 | 2.1 | 129.4 |
Nov 16, 2018 | -2.2 | 126.8 | -1.6 | 125.8 |
Nov 23, 2018 | -4.4 | 116.7 | -3.8 | 117.2 |
Nov 30, 2018 | 5.2 | 127.9 | 4.8 | 127.7 |
Dec 07, 2018 | -4.5 | 117.7 | -4.6 | 117.2 |
Dec 14, 2018 | -1.2 | 115.1 | -1.3 | 114.5 |
Dec 21, 2018 | -6.9 | 100.3 | -7.1 | 99.4 |
Dec 28, 2018 | 2.7 | 105.8 | 2.9 | 105.1 |
Jan 04, 2019 | 1.6 | 109.1 | 1.9 | 108.9 |
Jan 11, 2019 | 2.4 | 114.2 | 2.5 | 114.2 |
Jan 18, 2019 | 3.0 | 120.5 | 2.9 | 120.3 |
Jan 25, 2019 | 0.1 | 120.8 | -0.2 | 119.9 |
Feb 01, 2019 | 1.3 | 123.7 | 1.6 | 123.3 |
Feb 08, 2019 | 0.2 | 124.1 | 0.0 | 123.4 |
Feb 15, 2019 | 3.1 | 131.0 | 2.5 | 129.0 |
Feb 22, 2019 | 0.6 | 132.3 | 0.6 | 130.4 |
Mar 01, 2019 | 0.0 | 132.3 | 0.4 | 131.3 |
Mar 08, 2019 | -2.2 | 127.1 | -2.2 | 126.3 |
Mar 15, 2019 | 1.6 | 130.7 | 2.9 | 132.9 |
Mar 22, 2019 | -1.3 | 127.6 | -0.8 | 131.1 |
Mar 29, 2019 | 1.7 | 131.4 | 1.2 | 133.9 |
Apr 05, 2019 | 1.9 | 135.8 | 2.1 | 138.7 |
Apr 12, 2019 | 0.0 | 135.7 | 0.5 | 139.9 |
Apr 19, 2019 | 0.6 | 137.0 | -0.1 | 139.7 |
Apr 26, 2019 | -0.1 | 136.9 | 1.2 | 142.6 |
May 03, 2019 | -0.1 | 136.5 | 0.2 | 143.0 |
May 10, 2019 | -2.1 | 131.5 | -2.2 | 137.7 |
May 17, 2019 | -0.7 | 129.9 | -0.8 | 135.9 |
May 24, 2019 | -0.7 | 128.3 | -1.2 | 133.2 |
May 31, 2019 | -3.0 | 121.5 | -2.6 | 127.1 |
Jun 07, 2019 | 4.7 | 131.9 | 4.4 | 137.1 |
Jun 14, 2019 | 0.4 | 132.8 | 0.5 | 138.2 |
Jun 21, 2019 | 2.4 | 138.5 | 2.2 | 143.4 |
Jun 28, 2019 | -0.4 | 137.4 | -0.3 | 142.7 |
Jul 05, 2019 | 1.2 | 140.3 | 1.7 | 146.7 |
Jul 12, 2019 | 1.5 | 143.9 | 0.8 | 148.7 |
Jul 19, 2019 | -0.7 | 142.3 | -1.2 | 145.6 |
Jul 26, 2019 | 0.1 | 142.7 | 1.7 | 149.6 |
Aug 02, 2019 | -2.6 | 136.4 | -3.1 | 141.9 |
Aug 09, 2019 | -0.7 | 134.6 | -0.5 | 140.8 |
Aug 16, 2019 | -1.5 | 131.0 | -1.0 | 138.3 |
Aug 23, 2019 | -1.0 | 128.7 | -1.4 | 134.9 |
Aug 30, 2019 | 3.0 | 135.6 | 2.8 | 141.4 |
Sep 06, 2019 | 1.5 | 139.2 | 1.8 | 145.8 |
Sep 13, 2019 | 1.6 | 142.9 | 1.0 | 148.1 |
Sep 20, 2019 | -1.0 | 140.4 | -0.5 | 146.9 |
Sep 27, 2019 | -0.4 | 139.4 | -1.0 | 144.4 |
Oct 04, 2019 | -0.9 | 137.2 | -0.3 | 143.6 |
Oct 11, 2019 | 0.9 | 139.3 | 0.6 | 145.1 |
Oct 18, 2019 | -0.2 | 138.9 | 0.5 | 146.4 |
Oct 25, 2019 | 0.7 | 140.6 | 1.2 | 149.4 |
Nov 01, 2019 | 1.4 | 144.1 | 1.5 | 153.0 |
Nov 08, 2019 | 1.2 | 147.0 | 0.9 | 155.2 |
Nov 15, 2019 | 1.2 | 149.9 | 0.9 | 157.5 |
Nov 22, 2019 | -0.5 | 148.8 | -0.3 | 156.6 |
Nov 29, 2019 | 0.6 | 150.3 | 1.0 | 159.1 |
Dec 06, 2019 | -0.1 | 150.0 | 0.2 | 159.6 |
Dec 13, 2019 | 0.4 | 151.1 | 0.7 | 161.4 |
Dec 20, 2019 | 1.1 | 153.9 | 1.7 | 165.8 |
Dec 27, 2019 | 0.7 | 155.6 | 0.6 | 167.3 |
Jan 03, 2020 | 0.0 | 155.6 | -0.2 | 166.9 |
Jan 10, 2020 | 0.7 | 157.2 | 0.9 | 169.4 |
Jan 17, 2020 | 1.8 | 161.9 | 2.0 | 174.7 |
Jan 24, 2020 | -1.2 | 158.7 | -1.0 | 171.9 |
Jan 31, 2020 | -2.5 | 152.2 | -2.1 | 166.1 |
Feb 07, 2020 | 3.0 | 159.7 | 3.2 | 174.6 |
Feb 14, 2020 | 1.0 | 162.4 | 1.6 | 178.9 |
Feb 21, 2020 | -1.4 | 158.7 | -1.3 | 175.4 |
Feb 28, 2020 | -12.4 | 126.8 | -11.5 | 143.7 |
Mar 06, 2020 | 1.8 | 130.8 | 0.6 | 145.2 |
Mar 13, 2020 | -10.4 | 106.9 | -8.8 | 123.7 |
Mar 20, 2020 | -17.3 | 71.1 | -15.0 | 90.2 |
Mar 27, 2020 | 12.8 | 93.1 | 10.3 | 109.7 |
Apr 03, 2020 | -2.7 | 87.9 | -2.1 | 105.3 |
Apr 10, 2020 | 12.7 | 111.7 | 12.1 | 130.2 |
Apr 17, 2020 | 2.2 | 116.4 | 3.0 | 137.2 |
Apr 24, 2020 | -1.9 | 112.2 | -1.3 | 134.0 |
May 01, 2020 | -0.2 | 111.7 | -0.2 | 133.5 |
May 08, 2020 | 2.6 | 117.1 | 3.5 | 141.7 |
May 15, 2020 | -2.7 | 111.4 | -2.3 | 126.3 |
May 22, 2020 | 3.3 | 118.3 | 3.2 | 143.8 |
May 29, 2020 | 3.8 | 126.5 | 3.0 | 151.2 |
Jun 05, 2020 | 6.8 | 142.0 | 4.9 | 163.5 |
Jun 12, 2020 | -5.6 | 128.5 | -4.8 | 150.9 |
Jun 19, 2020 | 1.0 | 130.9 | 1.9 | 155.6 |
Jun 26, 2020 | -3.3 | 123.3 | -2.9 | 148.3 |
Jul 03, 2020 | 3.2 | 130.5 | 4.0 | 158.2 |
Jul 10, 2020 | 1.0 | 132.7 | 1.8 | 162.8 |
Jul 17, 2020 | 2.3 | 138.0 | 1.2 | 166.1 |
Jul 24, 2020 | -0.8 | 136.2 | -0.3 | `65.3 |
Jul 31, 2020 | -0.2 | 135.9 | 1.7 | 169.9 |
Aug 07, 2020 | 3.8 | 144.8 | 2.5 | 176.5 |
Aug 14, 2020 | 1.8 | 149.3 | 0.6 | 178.3 |
Aug 21, 2020 | 0.0 | 149.3 | 0.7 | 180.3 |
Aug 28, 2020 | 2.6 | 155.7 | 3.3 | 189.4 |
Sep 04, 2020 | -1.8 | 151.1 | -2.3 | 182.7 |
Sep 11, 2020 | -1.7 | 146.9 | -2.5 | 175.6 |
Sep 18, 2020 | 0.0 | 146.8 | -0.6 | 173.9 |
Sep 25, 2020 | -1.7 | 142.5 | -0.6 | 172.1 |
Oct 02, 2020 | 1.9 | 147.1 | 1.5 | 176.3 |
Oct 09, 2020 | 3.3 | 155.1 | 3.8 | 186.9 |
Oct 16, 2020 | 0.1 | 155.3 | 0.2 | 187.4 |
Source:
http://professional.wsj.com/mdc/public/page/mdc_us_stocks.html?mod=mdc_topnav_2_3014
http://professional.wsj.com/mdc/public/page/mdc_currencies.html?mod=mdc_topnav_2_3000
Table VI-7, updated with every blog comment, provides in the second column the yield at the close of market of the 10-year Treasury note on the date in the first column. The price in the third column is calculated with the coupon of 2.625 percent of the 10-year note current at the time of the second round of quantitative easing after Nov 3, 2010 and the final column “∆% 11/04/10” calculates the percentage change of the price on the date relative to that of 101.2573 at the close of market on Nov 4, 2010, one day after the decision on quantitative easing by the Fed on Nov 3, 2010. Prices with new coupons such as 2.0 percent in recent auctions (http://www.treasurydirect.gov/RI/OFAuctions?form=extended&cusip=912828RR3) are not comparable to prices in Table VI-7. The highest yield in the decade was 5.510 percent on May 1, 2001 that would result in a loss of principal of 22.9 percent relative to the price on Nov 4. Monetary policy has created a “duration trap” of bond prices. Duration is the percentage change in bond price resulting from a percentage change in yield or what economists call the yield elasticity of bond price. Duration is higher the lower the bond coupon and yield, all other things constant. This means that the price loss in a yield rise from low coupons and yields is much higher than with high coupons and yields. Intuitively, the higher coupon payments offset part of the price loss. Prices/yields of Treasury securities were affected by the combination of Fed purchases for its program of quantitative easing and by the flight to dollar-denominated assets because of geopolitical risks in the Middle East, subsequently by the tragic Great East Japan Earthquake and Tsunami and now again by the sovereign risk doubts in Europe and the growth recession in the US and the world. The yield of 0.738 percent at the close of market on Fri Oct 16, 2020 would be equivalent to price of 118.1583 in a hypothetical bond maturing in 10 years with coupon of 2.625 percent for price increase of 16.7 percent relative to the price on Nov 4, 2010, one day after the decision on the second program of quantitative easing, as shown in the last row of Table VI-7. The price loss between Sep 7, 2012 and Sep 14, 2012 would have been 1.7 percent in just five trading days. The price loss between Jun 1, 2012 and Jun 8, 2012 would have been 1.6 percent, in just a week, and much higher with leverage of 10:1 as typical in Treasury positions. The price loss between Mar 9, 2012 and Mar 16, 2012 is 2.3 percent but much higher when using common leverage of 10:1. The price loss between Dec 28, 2012 and Jan 4, 2013 would have been 1.7 percent. These losses defy annualizing. If inflation accelerates, yields of Treasury securities may rise sharply. Yields are not observed without special yield-lowering effects such as the flight into dollars caused by the events in the Middle East, continuing purchases of Treasury securities by the Fed, the tragic Tōhoku or Great East Earthquake and Tsunami of Mar 11, 2011 affecting Japan, recurring fears on European sovereign credit issues and worldwide risk aversion in the week of Sep 30 caused by “let’s twist again” monetary policy. There is a difficult climb from the record federal deficit of 9.8 percent of GDP in 2009 and cumulative deficit of $5090 billion in four consecutive years of deficits exceeding one trillion dollars from 2009 to 2012, which is the worst fiscal performance since World War II (https://cmpassocregulationblog.blogspot.com/2018/10/global-contraction-of-valuations-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/mediocre-cyclical-economic-growth-with.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/unresolved-us-balance-of-payments.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-reducing.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html and earlier Section IB at http://cmpassocregulationblog.blogspot.com/2012/08/expanding-bank-cash-and-deposits-with.html). There is no subsequent jump of debt in US peacetime history as the one from 39.4 percent of GDP in 2008 to 65.8 percent of GDP in 2011, 70.3 percent in 2012, 72.2 percent in 2013, 73.7 percent in 2014, 72.5 percent in 2015, 76.4 percent in 2016, 76.1 percent in 2017 and 77.8 percent in 2018 (https://www.cbo.gov/about/products/budget-economic-data#6) (https://cmpassocregulationblog.blogspot.com/2018/10/global-contraction-of-valuations-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/mediocre-cyclical-economic-growth-with.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/unresolved-us-balance-of-payments.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-reducing.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-and-dollar.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html
and earlier http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html). The US is facing an unsustainable debt/GDP path (https://cmpassocregulationblog.blogspot.com/2018/10/global-contraction-of-valuations-of.html and earlier and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-yields-and-dollar-revaluation.html http://cmpassocregulationblog.blogspot.com/2016/07/unresolved-us-balance-of-payments.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-and-dollar.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html).
The Chair of the Federal Reserve Board, Jerome H. Powell, at the 61st Annual Meeting on the National Association for Business Economics, on Oct 28, 2019, in Denver, Colorado, stated (https://www.federalreserve.gov/newsevents/speech/powell20191008a.htm): “Reserve balances are one among several items on the liability side of the Federal Reserve's balance sheet, and demand for these liabilities—notably, currency in circulation—grows over time. Hence, increasing the supply of reserves or even maintaining a given level over time requires us to increase the size of our balance sheet. As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves.18 That time is now upon us.
I want to emphasize that growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis. Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy, to which I now turn.” On October 25, 2017, at the beginning of the FOMC programmed reduction of the balance sheet, Total Assets of Federal Reserve Banks stood at $4,461,117 million. Total Assets increased $2,690,309 million from $4,461,117 on Oct 25, 2017 to $7,151,426 on Oct 14, 2020. Total Assets of Federal Reserve Banks increased from $3,981,420 million on Feb 20, 2019 to $7,151,426 million on Oct 14, 2020, by $3,170,006 million or 79.6 percent. The policy of reducing the fed funds policy rate requires increasing the balance sheet. The line “Securities Held Outright” increased from $4,019,823 million on Oct 25, 2017 to $6,534,164 on Oct 14, 2020 or $2,514,341 million. Securities Held Outright increased from $3,617,939 million on Jul 1, 2019 to $6,534,164 on Oct 14, 2020 by $2,916,225 million or 80.6 percent. The portfolio of long-term securities (“securities held outright”) for monetary policy consists primarily of $6167 billion, or $6.17 trillion, of which $3,827 billion Treasury nominal notes and bonds, $291 billion of notes and bonds inflation-indexed, $2 billion Federal agency debt securities and $2047 billion mortgage-backed securities ($2,046,839 million). Reserve balances deposited with Federal Reserve Banks reached $2908 billion ($2,907,734 million) or $2.9 trillion (https://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab1). The rounded values of $1649 billion of reserves deposited at Federal Reserve Banks and mortgage-backed securities are identical on Dec 19, 2018, by pure coincidence. There is no simple exit of this trap created by the highest monetary policy accommodation in US history together with the highest deficits and debt in percent of GDP since World War II. Risk aversion from various sources, discussed in section III World Financial Turbulence, has been affecting financial markets for several months. The risk is that in a reversal of exposures because of increasing risk aversion that has been typical in this cyclical expansion of the economy yields of Treasury securities may back up sharply.
Table VI-7, Yield, Price and Percentage Change to November 4, 2010 of Ten-Year Treasury Note
Date | Yield | Price | ∆% 11/04/10 |
05/01/01 | 5.510 | 78.0582 | -22.9 |
06/10/03 | 3.112 | 95.8452 | -5.3 |
06/12/07 | 5.297 | 79.4747 | -21.5 |
12/19/08 | 2.213 | 104.4981 | 3.2 |
12/31/08 | 2.240 | 103.4295 | 2.1 |
03/19/09 | 2.605 | 100.1748 | -1.1 |
06/09/09 | 3.862 | 89.8257 | -11.3 |
10/07/09 | 3.182 | 95.2643 | -5.9 |
11/27/09 | 3.197 | 95.1403 | -6.0 |
12/31/09 | 3.835 | 90.0347 | -11.1 |
02/09/10 | 3.646 | 91.5239 | -9.6 |
03/04/10 | 3.605 | 91.8384 | -9.3 |
04/05/10 | 3.986 | 88.8726 | -12.2 |
08/31/10 | 2.473 | 101.3338 | 0.08 |
10/07/10 | 2.385 | 102.1224 | 0.8 |
10/28/10 | 2.658 | 99.7119 | -1.5 |
11/04/10 | 2.481 | 101.2573 | - |
11/15/10 | 2.964 | 97.0867 | -4.1 |
11/26/10 | 2.869 | 97.8932 | -3.3 |
12/03/10 | 3.007 | 96.7241 | -4.5 |
12/10/10 | 3.324 | 94.0982 | -7.1 |
12/15/10 | 3.517 | 92.5427 | -8.6 |
12/17/10 | 3.338 | 93.9842 | -7.2 |
12/23/10 | 3.397 | 93.5051 | -7.7 |
12/31/10 | 3.228 | 94.3923 | -6.7 |
01/07/11 | 3.322 | 94.1146 | -7.1 |
01/14/11 | 3.323 | 94.1064 | -7.1 |
01/21/11 | 3.414 | 93.4687 | -7.7 |
01/28/11 | 3.323 | 94.1064 | -7.1 |
02/04/11 | 3.640 | 91.750 | -9.4 |
02/11/11 | 3.643 | 91.5319 | -9.6 |
02/18/11 | 3.582 | 92.0157 | -9.1 |
02/25/11 | 3.414 | 93.3676 | -7.8 |
03/04/11 | 3.494 | 92.7235 | -8.4 |
03/11/11 | 3.401 | 93.4727 | -7.7 |
03/18/11 | 3.273 | 94.5115 | -6.7 |
03/25/11 | 3.435 | 93.1935 | -7.9 |
04/01/11 | 3.445 | 93.1129 | -8.0 |
04/08/11 | 3.576 | 92.0635 | -9.1 |
04/15/11 | 3.411 | 93.3874 | -7.8 |
04/22/11 | 3.402 | 93.4646 | -7.7 |
04/29/11 | 3.290 | 94.3759 | -6.8 |
05/06/11 | 3.147 | 95.5542 | -5.6 |
05/13/11 | 3.173 | 95.3387 | -5.8 |
05/20/11 | 3.146 | 95.5625 | -5.6 |
05/27/11 | 3.068 | 96.2089 | -4.9 |
06/03/11 | 2.990 | 96.8672 | -4.3 |
06/10/11 | 2.973 | 97.0106 | -4.2 |
06/17/11 | 2.937 | 97.3134 | -3.9 |
06/24/11 | 2.872 | 97.8662 | -3.3 |
07/01/11 | 3.186 | 95.2281 | -5.9 |
07/08/11 | 3.022 | 96.5957 | -4.6 |
07/15/11 | 2.905 | 97.5851 | -3.6 |
07/22/11 | 2.964 | 97.0847 | -4.1 |
07/29/11 | 2.795 | 98.5258 | -2.7 |
08/05/11 | 2.566 | 100.5175 | -0.7 |
08/12/11 | 2.249 | 103.3504 | 2.1 |
08/19/11 | 2.066 | 105.270 | 3.7 |
08/26/11 | 2.202 | 103.7781 | 2.5 |
09/02/11 | 1.992 | 105.7137 | 4.4 |
09/09/11 | 1.918 | 106.4055 | 5.1 |
09/16/11 | 2.053 | 101.5434 | 0.3 |
09/23/11 | 1.826 | 107.2727 | 5.9 |
09/30/11 | 1.912 | 106.4602 | 5.1 |
10/07/11 | 2.078 | 104.9161 | 3.6 |
10/14/11 | 2.251 | 103.3323 | 2.0 |
10/21/11 | 2.220 | 103.6141 | 2.3 |
10/28/11 | 2.326 | 102.6540 | 1.4 |
11/04/11 | 2.066 | 105.0270 | 3.7 |
11/11/11 | 2.057 | 105.1103 | 3.8 |
11/18/11 | 2.003 | 105.6113 | 4.3 |
11/25/11 | 1.964 | 105.9749 | 4.7 |
12/02/11 | 2.042 | 105.2492 | 3.9 |
12/09/11 | 2.065 | 105.0363 | 3.7 |
12/16/11 | 1.847 | 107.0741 | 5.7 |
12/23/11 | 2.027 | 105.3883 | 4.1 |
12/30/11 | 1.871 | 106.8476 | 5.5 |
01/06/12 | 1.957 | 106.0403 | 4.7 |
01/13/12 | 1.869 | 106.8664 | 5.5 |
01/20/12 | 2.026 | 105.3976 | 4.1 |
01/27/12 | 1.893 | 106.6404 | 5.3 |
02/03/12 | 1.923 | 106.3586 | 5.0 |
02/10/12 | 1.974 | 105.8815 | 4.6 |
02/17/12 | 2.000 | 105.6392 | 4.3 |
02/24/12 | 1.977 | 105.8535 | 4.5 |
03/02/12 | 1.977 | 105.8535 | 4.5 |
03/09/12 | 2.031 | 105.3512 | 4.0 |
03/16/12 | 2.294 | 102.9428 | 1.7 |
03/23/12 | 2.234 | 103.4867 | 2.2 |
03/30/12 | 2.214 | 103.6687 | 2.4 |
04/06/12 | 2.058 | 105.1010 | 3.8 |
04/13/12 | 1.987 | 105.7603 | 4.4 |
04/20/12 | 1.959 | 106.0216 | 4.7 |
04/27/12 | 1.931 | 106.2836 | 5.0 |
05/04/12 | 1.876 | 106.8004 | 5.5 |
05/11/12 | 1.845 | 107.0930 | 5.8 |
05/18/12 | 1.714 | 108.3393 | 7.0 |
05/25/12 | 1.738 | 108.1098 | 6.8 |
06/01/12 | 1.454 | 110.8618 | 9.5 |
06/08/12 | 1.635 | 109.0989 | 7.7 |
06/15/12 | 1.584 | 109.5924 | 8.2 |
06/22/12 | 1.676 | 108.7039 | 7.4 |
06/29/12 | 1.648 | 108.9734 | 7.6 |
07/06/12 | 1.548 | 109.9423 | 8.6 |
07/13/12 | 1.49 | 110.5086 | 9.1 |
07/20/12 | 1.459 | 110.8127 | 9.4 |
07/27/12 | 1.544 | 109.9812 | 8.6 |
08/03/12 | 1.569 | 109.7380 | 8.4 |
08/10/12 | 1.658 | 108.8771 | 7.5 |
08/17/12 | 1.814 | 107.3864 | 6.1 |
08/24/12 | 1.684 | 108.6270 | 7.3 |
08/31/12 | 1.543 | 109.9910 | 8.6 |
9/7/12 | 1.668 | 108.7808 | 7.4 |
9/14/12 | 1.863 | 106.9230 | 5.6 |
9/21/12 | 1.753 | 107.9666 | 6.6 |
9/28/12 | 1.631 | 109.1375 | 7.8 |
10/05/12 | 1.737 | 108.1193 | 6.8 |
10/12/12 | 1.663 | 108.8290 | 7.5 |
10/19/12 | 1.766 | 107.8426 | 6.5 |
10/26/12 | 1.748 | 108.0143 | 6.7 |
11/02/12 | 1.715 | 108.3297 | 7.0 |
11/09/12 | 1.614 | 109.3018 | 7.9 |
11/16/12 | 1.584 | 109.5924 | 8.2 |
11/23/12 | 1.691 | 108.5598 | 7.2 |
11/30/12 | 1.612 | 109.3211 | 7.9 |
12/7/12 | 1.625 | 109.1954 | 7.8 |
12/14/12 | 1.704 | 108.4351 | 7.1 |
12/21/12 | 1.770 | 107.8045 | 6.5 |
12/28/12 | 1.699 | 108.4831 | 7.1 |
1/4/13 | 1.898 | 106.5934 | 5.3 |
1/11/13 | 1.862 | 106.9324 | 5.6 |
1/18/13 | 1.840 | 107.1403 | 5.8 |
1/25/13 | 1.947 | 106.1338 | 4.8 |
2/1/13 | 2.024 | 105.4161 | 4.1 |
2/8/13 | 1.949 | 106.1151 | 4.8 |
2/15/13 | 2.007 | 105.5741 | 4.3 |
2/22/13 | 1.967 | 105.9469 | 4.6 |
3/1/13 | 1.842 | 107.1213 | 5.8 |
3/8/13 | 2.056 | 105.1195 | 3.8 |
3/15/13 | 1.992 | 105.7137 | 4.4 |
03/22/13 | 1.931 | 106.2836 | 5.0 |
03/29/13 | 1.847 | 107.0741 | 5.7 |
04/05/13 | 1.706 | 108.4160 | 7.1 |
04/12/13 | 1.719 | 108.2914 | 6.9 |
04/19/13 | 1.702 | 108.4543 | 7.1 |
04/26/13 | 1.663 | 108.8290 | 7.5 |
05/3/13 | 1.742 | 108.2436 | 6.9 |
05/10/13 | 1.896 | 106.6122 | 5.3 |
05/17/13 | 1.952 | 106.0870 | 4.8 |
05/24/13 | 2.009 | 105.5555 | 4.2 |
05/31/13 | 2.132 | 104.5015 | 3.2 |
06/07/13 | 2.174 | 104.0338 | 2.7 |
06/14/13 | 2.125 | 104.4831 | 3.2 |
06/21/13 | 2.542 | 100.7288 | -0.5 |
06/28/13 | 2.486 | 101.2240 | 0.0 |
07/5/13 | 2.734 | 99.0519 | -2.2 |
07/12/13 | 2.585 | 100.3505 | -0.9 |
07/19/13 | 2.480 | 101.2772 | 0.0 |
07/26/13 | 2.565 | 100.5263 | -0.7 |
08/2/13 | 2.597 | 100.2452 | -1.0 |
8/9/13 | 2.579 | 100.4032 | -0.8 |
8/16/13 | 2.829 | 98.2339 | -3.0 |
8/23/13 | 2.818 | 98.3283 | -2.9 |
8/30/13 | 2.784 | 98.6205 | -2.6 |
9/6/13 | 2.941 | 97.2795 | -3.9 |
9/13/13 | 2.890 | 97.7128 | -3.5 |
9/20/13 | 2.734 | 99.0519 | -2.2 |
9/27/13 | 2.626 | 99.9913 | -1.3 |
10/4/13 | 2.645 | 99.8253 | -1.4 |
10/11/13 | 2.688 | 99.4508 | -1.8 |
10/18/13 | 2.588 | 100.3242 | -0.9 |
10/25/13 | 2.507 | 101.0380 | -0.2 |
11/1/13 | 2.622 | 100.0262 | -1.2 |
11/8/13 | 2.750 | 98.9136 | -2.3 |
11/15/13 | 2.704 | 99.3118 | -1.9 |
11/22/13 | 2.746 | 98.9482 | -2.3 |
11/29/13 | 2.743 | 98.9741 | -2.3 |
12/6/13 | 2.858 | 97.9858 | -3.2 |
12/13/13 | 2.865 | 97.9260 | -3.3 |
12/20/13 | 2.891 | 97.7043 | -3.5 |
12/27/13 | 3.004 | 96.7472 | -4.5 |
1/3/2014 | 2.999 | 96.7893 | -4.4 |
1/10/14 | 2.858 | 97.9858 | -3.2 |
1/17/14 | 2.818 | 98.3283 | -2.9 |
1/24/14 | 2.720 | 99.1731 | -2.1 |
1/31/14 | 2.645 | 99.8253 | -1.4 |
2/7/14 | 2.681 | 99.5116 | -1.7 |
2/14/14 | 2.743 | 98.9741 | -2.3 |
2/21/14 | 2.730 | 99.0865 | -2.1 |
2/28/14 | 2.655 | 99.7380 | -1.5 |
3/7/14 | 2.792 | 98.5516 | -2.7 |
3/14/14 | 2.654 | 99.7468 | -1.5 |
3/21/14 | 2.743 | 98.9741 | -2.3 |
3/28/14 | 2.721 | 99.1645 | -2.1 |
4/4/14 | 2.724 | 99.1385 | -2.1 |
4/11/14 | 2.628 | 99.9738 | -1.3 |
4/18/14 | 2.724 | 99.1385 | -2.1 |
4/25/14 | 2.668 | 99.6248 | -1.6 |
5/2/14 | 2.583 | 100.3681 | -0.9 |
5/9/14 | 2.624 | 100.0088 | -1.2 |
5/16/14 | 2.520 | 100.9320 | -0.3 |
5/23/14 | 2.532 | 100.8171 | -0.4 |
5/30/14 | 2.473 | 101.3394 | 0.1 |
6/6/2014 | 2.598 | 100.2364 | -1.0 |
6/13/14 | 2.605 | 100.1751 | -1.1 |
6/20/14 | 2.609 | 00.1400 | -1.1 |
6/27/14 | 2.536 | 100.7818 | -0.05 |
7/4/14 | 2.641 | 99.8602 | -1.4 |
7/11/14 | 2.516 | 100.9584 | -0.3 |
7/18/14 | 2.484 | 101.2417 | 0.0 |
7/25/14 | 2.464 | 101.4193 | 0.2 |
8/1/14 | 2.497 | 101.1265 | -0.1 |
8/8/14 | 2.420 | 101.8111 | 0.5 |
8/15/14 | 2.341 | 102.5190 | 1.2 |
8/22/14 | 2.399 | 101.9988 | 0.7 |
8/29/14 | 2.342 | 102.5100 | 1.2 |
9/5/14 | 2.457 | 101.4815 | 0.2 |
9/12/14 | 2.606 | 10.1663 | -1.1 |
9/19/14 | 2.576 | 100.4296 | -0.8 |
9/26/14 | 2.527 | 100.8612 | -0.4 |
10/03/14 | 2.437 | 101.6595 | 0.4 |
10/10/14 | 2.292 | 102.9609 | 1.7 |
10/17/14 | 2.197 | 103.8237 | 2.5 |
10/24/14 | 2.263 | 103.2234 | 1.9 |
10/31/14 | 2.332 | 102.6000 | 1.3 |
11/07/14 | 2.302 | 102.8705 | 1.6 |
11/14/14 | 2.319 | 102.7171 | 1.4 |
11/21/14 | 2.307 | 102.8254 | 1.5 |
11/28/14 | 2.165 | 104.1162 | 2.8 |
12/5/14 | 2.306 | 102.8344 | 1.6 |
12/12/14 | 2.086 | 104.8423 | 3.5 |
12/19/14 | 2.185 | 103.9333 | 2.6 |
12/26/14 | 2.248 | 103.3595 | 2.1 |
01/02/15 | 2.126 | 104.4739 | 3.2 |
01/09/15 | 1.973 | 105.8909 | 4.6 |
01/16/15 | 1.826 | 107.2727 | 5.9 |
01/23/15 | 1.804 | 107.4813 | 6.1 |
01/30/15 | 1.683 | 108.6367 | 7.3 |
02/06/15 | 1.941 | 106.1899 | 4.9 |
02/13/15 | 2.043 | 105.2399 | 3.9 |
02/20/15 | 2.119 | 104.5383 | 3.2 |
02/27/15 | 2.016 | 105.4905 | 4.2 |
03/06/15 | 2.238 | 103.4503 | 2.2 |
03/13/15 | 2.103 | 104.6856 | 3.4 |
03/20/15 | 1.927 | 106.3211 | 5.0 |
03/27/15 | 1.951 | 106.0964 | 4.8 |
04/02/15 | 1.911 | 106.4712 | 5.1 |
04/10/15 | 1.950 | 106.1057 | 4.8 |
04/17/15 | 1.864 | 106.9136 | 5.6 |
04/24/15 | 1.917 | 106.4149 | 5.1 |
05/01/15 | 2.118 | 104.5475 | 3.2 |
05/08/15 | 2.153 | 104.2261 | 2.9 |
05/15/15 | 2.136 | 104.3821 | 3.1 |
05/22/15 | 2.211 | 103.6961 | 2.4 |
05/29/15 | 2.092 | 104.7869 | 3.5 |
06/05/15 | 2.400 | 101.9898 | 0.7 |
06/12/15 | 2.388 | 102.0972 | 0.8 |
06/19/15 | 2.270 | 103.1599 | 1.9 |
06/26/15 | 2.473 | 101.3394 | 0.1 |
07/03/15 | 2.383 | 102.1420 | 0.9 |
07/10/15 | 2.414 | 101.8647 | 0.6 |
07/17/15 | 2.346 | 102.4740 | 1.2 |
07/24/15 | 2.268 | 103.1781 | 1.9 |
07/31/15 | 2.207 | 103.7325 | 2.4 |
08/07/15 | 2.164 | 104.1254 | 2.8 |
08/14/15 | 2.196 | 103.8328 | 2.5 |
08/21/15 | 2.052 | 105.1565 | 3.9 |
08/28/15 | 2.182 | 103.9607 | 2.7 |
09/04/15 | 2.127 | 104.4647 | 3.2 |
09/11/15 | 2.181 | 103.9698 | 2.7 |
09/18/15 | 2.131 | 104.4280 | 3.1 |
09/25/15 | 2.168 | 104.0887 | 2.8 |
10/02/15 | 1.988 | 105.7510 | 4.4 |
10/09/15 | 2.096 | 104.7501 | 3.4 |
10/16/15 | 2.024 | 105.4161 | 4.1 |
10/23/15 | 2.083 | 104.8700 | 3.6 |
10/30/15 | 2.150 | 104.2536 | 3.0 |
11/06/15 | 2.332 | 102.6000 | 1.3 |
11/13/15 | 2.278 | 103.0875 | 1.8 |
11/20/15 | 2.260 | 103.2506 | 2.0 |
11/27/15 | 2.223 | 103.5868 | 2.3 |
12/04/15 | 2.276 | 103.1056 | 1.8 |
12/11/15 | 2.134 | 104.4004 | 3.1 |
12/18/15 | 2.197 | 103.8237 | 2.5 |
12/25/15 | 2.242 | 103.4140 | 2.1 |
01/01/16 | 2.269 | 103.1690 | 1.9 |
01/08/16 | 2.135 | 104.3913 | 3.1 |
01/15/16 | 2.036 | 105.3048 | 4.0 |
01/22/15 | 2.048 | 105.1936 | 3.9 |
01/29/16 | 1.923 | 106.3586 | 5.0 |
02/05/16 | 1.848 | 107.0646 | 5.7 |
02/12/16 | 1.744 | 108.0525 | 6.7 |
02/19/16 | 1.748 | 108.0143 | 6.7 |
02/26/16 | 1.766 | 107.8426 | 6.5 |
03/04/16 | 1.884 | 106.7251 | 5.4 |
03/11/16 | 1.977 | 105.8535 | 4.5 |
03/18/16 | 1.871 | 106.8476 | 5.5 |
03/25/16 | 1.900 | 106.5746 | 5.3 |
04/01/16 | 1.795 | 107.5667 | 6.2 |
04/08/16 | 1.722 | 108.2627 | 6.9 |
04/15/16 | 1.752 | 107.9761 | 6.6 |
04/22/16 | 1.886 | 106.7063 | 5.4 |
04/29/16 | 1.820 | 107.3296 | 6.0 |
05/06/16 | 1.780 | 107.7094 | 6.4 |
05/13/16 | 1.706 | 108.4160 | 7.1 |
05/20/16 | 1.849 | 107.0552 | 5.7 |
05/27/16 | 1.851 | 107.0363 | 5.7 |
06/03/16 | 1.704 | 108.4351 | 7.1 |
06/10/16 | 1.638 | 109.0699 | 7.7 |
06/17/16 | 1.618 | 109.2631 | 7.9 |
06/24/16 | 1.575 | 109.6797 | 8.3 |
07/01/16 | 1.443 | 110.9700 | 9.6 |
07/08/16 | 1.366 | 111.7306 | 10.3 |
07/15/16 | 1.595 | 109.4857 | 8.1 |
07/22/16 | 1.567 | 109.7575 | 8.4 |
07/29/16 | 1.458 | 110.8225 | 9.4 |
08/05/16 | 1.583 | 109.6021 | 8.2 |
08/12/16 | 1.514 | 110.2739 | 8.9 |
08/19/16 | 1.580 | 109.6312 | 8.3 |
08/26/16 | 1.635 | 109.0989 | 7.7 |
09/02/16 | 1.597 | 109.4663 | 8.1 |
09/09/16 | 1.675 | 108.7135 | 7.4 |
09/16/16 | 1.699 | 108.4831 | 7.1 |
09/23/16 | 1.614 | 109.3018 | 7.9 |
09/30/16 | 1.602 | 109.4179 | 8.1 |
10/07/16 | 1.732 | 108.1671 | 6.8 |
10/14/16 | 1.791 | 107.6048 | 6.3 |
10/21/16 | 1.738 | 108.1098 | 6.8 |
10/28/16 | 1.843 | 107.1119 | 5.8 |
11/04/16 | 1.784 | 107.6173 | 6.3 |
11/11/16 | 2.152 | 104.2353 | 2.9 |
11/18/16 | 2.340 | 102.5280 | 1.3 |
11/25/16 | 2.358 | 102.3662 | 1.1 |
12/01/16 | 2.389 | 102.0883 | 0.8 |
12/09/16 | 2.466 | 101.4015 | 0.1 |
12/16/16 | 2.597 | 100.2452 | -1.0 |
12/23/16 | 2.542 | 100.7289 | -0.5 |
12/30/16 | 2.447 | 101.5705 | 0.3 |
01/06/17 | 2.416 | 101.8469 | 0.6 |
01/13/17 | 2.381 | 102.1599 | 0.9 |
01/20/17 | 2.466 | 101.4015 | 0.1 |
01/27/17 | 2.479 | 101.2861 | 0.0 |
02/03/17 | 2.488 | 101.2063 | -0.1 |
02/10/17 | 2.408 | 101.9183 | 0.7 |
02/17/17 | 2.425 | 101.7665 | 0.5 |
02/24/17 | 2.314 | 102.7622 | 1.5 |
03/03/17 | 2.492 | 101.1708 | -0.1 |
03/10/17 | 2.584 | 100.3593 | -0.9 |
03/17/17 | 2.502 | 101.0823 | -0.2 |
03/24/17 | 2.399 | 101.9888 | 0.7 |
03/31/17 | 2.396 | 102.0256 | 0.8 |
04/07/17 | 2.373 | 102.2316 | 1.0 |
04/14/17 | 2.234 | 103.4867 | 2.2 |
04/21/17 | 2.233 | 103.4958 | 2.2 |
04/28/17 | 2.286 | 103.0151 | 1.7 |
05/05/17 | 2.352 | 102.4201 | 1.1 |
05/12/17 | 2.333 | 102.5910 | 1.3 |
05/19/17 | 2.243 | 103.4049 | 2.1 |
05/26/17 | 2.247 | 103.3686 | 2.1 |
06/02/17 | 2.161 | 104.1528 | 2.9 |
06/09/17 | 2.199 | 103.8055 | 2.5 |
06/16/17 | 2.154 | 104.2170 | 2.9 |
06/23/17 | 2.144 | 104.3087 | 3.0 |
06/30/17 | 2.304 | 102.8525 | 1.6 |
07/07/17 | 2.393 | 102.0524 | 0.8 |
07/14/17 | 2.323 | 102.6811 | 1.4 |
07/21/17 | 2.233 | 103.4985 | 2.2 |
07/28/17 | 2.288 | 102.9970 | 1.7 |
08/04/17 | 2.268 | 103.1781 | 1.9 |
08/11/17 | 2.189 | 103.8968 | 2.6 |
08/18/17 | 2.196 | 103.8328 | 2.5 |
08/25/17 | 2.171 | 104.0613 | 2.8 |
09/01/17 | 2.157 | 101.2573 | 2.9 |
09/08/17 | 2.061 | 105.0733 | 3.8 |
09/15/17 | 2.201 | 103.7872 | 2.5 |
09/22/17 | 2.263 | 103.2234 | 1.9 |
09/29/17 | 2.327 | 102.6450 | 1.4 |
10/06/17 | 2.368 | 102.2765 | 1.0 |
10/13/17 | 2.278 | 103.0875 | 1.8 |
10/20/17 | 2.379 | 102.1778 | 0.9 |
10/27/17 | 2.423 | 101.7844 | 0.5 |
11/03/17 | 2.343 | 102.5010 | 1.2 |
11/10/17 | 2.404 | 101.9541 | 0.7 |
11/17/17 | 2.354 | 102.4021 | 1.1 |
11/24/17 | 3.343 | 102.5010 | 1.2 |
12/01/17 | 2.361 | 102.3393 | 1.1 |
12/08/17 | 2.383 | 102.1420 | 0.9 |
12/15/17 | 2.355 | 102.3932 | 1.1 |
12/22/17 | 2.487 | 101.2151 | 0.0 |
12/29/17 | 2.411 | 101.8915 | 0.6 |
01/05/18 | 2.475 | 101.3216 | 0.1 |
01/12/18 | 2.550 | 100.6583 | -0.6 |
01/19/18 | 2.638 | 99.8864 | -1.4 |
01/26/18 | 2.661 | 99.6857 | -1.6 |
02/02/18 | 2.848 | 98.0713 | -3.1 |
02/09/18 | 2.830 | 98.2254 | -3.0 |
02/16/18 | 2.877 | 97.8236 | -3.4 |
02/23/18 | 2.870 | 97.8833 | -3.3 |
03/02/18 | 2.855 | 98.0114 | -3.2 |
03/09/18 | 2.893 | 97.6872 | -3.5 |
03/16/18 | 2.845 | 98.0969 | -3.1 |
03/23/18 | 2.826 | 98.2597 | -3.0 |
03/30/18 | 2.739 | 99.0087 | -2.2 |
04/06/18 | 2.778 | 98.6721 | -2.6 |
04/13/18 | 2.825 | 98.2682 | -3.0 |
04/20/18 | 2.953 | 97.1778 | -4.0 |
04/27/18 | 2.955 | 97.1609 | -4.1 |
05/04/18 | 2.943 | 97.2625 | -3.9 |
05/11/18 | 2.970 | 97.0340 | -4.2 |
05/18/18 | 3.065 | 96.2350 | -5.0 |
05/25/18 | 2.928 | 97.3897 | -3.8 |
06/01/18 | 2.889 | 97.7213 | -3.5 |
06/08/18 | 2.938 | 97.3049 | -3.9 |
06/15/18 | 2.922 | 97.4406 | -3.8 |
06/22/18 | 2.902 | 97.6106 | -3.6 |
06/29/18 | 2.850 | 98.0542 | -3.2 |
07/06/18 | 2.821 | 98.3025 | -2.9 |
07/13/18 | 2.830 | 98.2254 | -3.0 |
07/20/18 | 2.890 | 97.7128 | -3.5 |
07/27/18 | 2.959 | 97.1270 | -4.1 |
08/03/18 | 2.952 | 97.1863 | -4.0 |
08/10/18 | 2.859 | 97.9772 | -3.2 |
08/17/18 | 2.870 | 97.8833 | -3.3 |
08/24/18 | 2.823 | 98.2854 | -2.9 |
08/31/18 | 2.850 | 98.0542 | -3.2 |
09/07/18 | 2.936 | 97.3218 | -3.9 |
08/14/18 | 2.987 | 96.8905 | -4.3 |
09/21/18 | 3.067 | 96.2182 | -5.0 |
09/28/18 | 3.055 | 96.3187 | -4.9 |
10/05/18 | 3.231 | 94.8567 | -6.3 |
10/12/18 | 3.137 | 95.6344 | -5.6 |
10/19/18 | 3.198 | 95.1289 | -6.1 |
10/26/18 | 3.077 | 96.1346 | -5.1 |
11/02/18 | 3.216 | 94.9803 | -6.2 |
11/09/18 | 3.188 | 95.2115 | -6.0 |
11/16/18 | 3.075 | 96.1513 | -5.0 |
11/23/18 | 3.039 | 96.4529 | -4.7 |
11/30/18 | 3.014 | 96.6630 | -4.5 |
12/07/18 | 2.848 | 98.0713 | -3.1 |
12/14/18 | 2.892 | 97.6957 | -3.5 |
12/21/18 | 2.791 | 98.5602 | -2.7 |
12/28/18 | 2.736 | 99.0346 | -2.2 |
01/04/19 | 2.568 | 99.7119 | -1.5 |
01/11/19 | 2.700 | 99.3466 | -1.9 |
01/18/19 | 2.780 | 98.6549 | -2.6 |
01/25/19 | 2.750 | 98.9136 | -2.3 |
02/01/19 | 2.691 | 99.4247 | -1.8 |
02/08/19 | 2.636 | 99.039 | -1.3 |
02/15/19 | 2.667 | 99.6335 | -1.6 |
02/22/19 | 2.652 | 99.7642 | -1.5 |
03/01/19 | 2.747 | 98.9395 | -2.3 |
03/08/19 | 2.630 | 99.9563 | -1.3 |
03/15/19 | 2.593 | 100.2803 | -1.0 |
03/22/19 | 2.453 | 101.5171 | 0.3 |
03/29/19 | 2.416 | 101.8469 | 0.6 |
04/05/19 | 2.503 | 101.0734 | -0.2 |
04/12/19 | 2.557 | 100.5967 | -0.7 |
04/19/19 | 2.564 | 100.5351 | -0.7 |
04/26/19 | 2.505 | 101.0557 | -0.2 |
05/03/19 | 2.526 | 100.8700 | -0.4 |
05/10/19 | 2.457 | 101.4815 | 0.2 |
05/17/19 | 2.398 | 102.0077 | 0.7 |
05/24/19 | 2.323 | 102.6811 | 1.4 |
05/31/19 | 2.141 | 104.3362 | 3.0 |
06/07/19 | 2.082 | 104.8792 | 3.6 |
06/14/19 | 2.095 | 104.7593 | 3.5 |
06/21/19 | 2.062 | 105.0640 | 3.8 |
06/28/19 | 2.006 | 105.5834 | 4.3 |
07/05/19 | 2.045 | 105.2214 | 3.9 |
07/12/19 | 2.107 | 104.6487 | 3.3 |
07/19/19 | 2.049 | 105.1843 | 3.9 |
07/26/19 | 2.080 | 104.8977 | 3.6 |
08/02/19 | 1.860 | 106.9513 | 5.6 |
08/09/19 | 1.736 | 108.1289 | 6.8 |
08/16/19 | 1.540 | 110.0202 | 8.7 |
08/23/19 | 1.526 | 110.1567 | 8.8 |
08/30/19 | 1.504 | 110.3716 | 9.0 |
09/06/19 | 1.554 | 109.8839 | 8.5 |
09/13/19 | 1.894 | 106.6310 | 5.3 |
09/20/19 | 1.754 | 107.9570 | 6.6 |
09/27/19 | 1.676 | 108.7039 | 7.4 |
10/04/19 | 1.515 | 110.2641 | 8.9 |
10/11/19 | 1.753 | 107.9666 | 6.6 |
10/18/19 | 1.749 | 108.0047 | 6.7 |
10/25/19 | 1.800 | 107.5193 | 6.2 |
11/01/19 | 1.716 | 108.3202 | 7.0 |
11/08/19 | 1.929 | 106.3024 | 5.0 |
11/15/19 | 1.835 | 107.1876 | 5.9 |
11/22/19 | 1.773 | 107.7760 | 6.4 |
11/29/19 | 1.782 | 107.6903 | 6.4 |
12/06/19 | 1.838 | 107.1592 | 5.8 |
12/13/19 | 1.820 | 107.3296 | 6.0 |
12/20/19 | 1.915 | 106.4337 | 5.1 |
12/27/19 | 1.869 | 106.8664 | 5.5 |
01/03/20 | 1.791 | 107.6048 | 6.3 |
01/10/20 | 1.826 | 107.2727 | 5.9 |
01/17/20 | 1.836 | 107.1781 | 5.8 |
01/24/20 | 1.678 | 108.6847 | 9.3 |
01/31/20 | 1.521 | 110.2055 | 8.8 |
02/07/20 | 1.579 | 109.6409 | 8.3 |
02/14/20 | 1.587 | 109.5633 | 8.2 |
02/21/20 | 1.473 | 110.6753 | 9.3 |
02/28/20 | 1.148 | 113.9161 | 12.5 |
03/06/20 | 0.709 | 118.4650 | 17.0 |
03/13/20 | 0.955 | 115.8912 | 14.5 |
03/20/20 | 0.949 | 115.9533 | 14.5 |
03/27/20 | 0.731 | 118.2322 | 16.8 |
04/03/20 | 0.592 | 119.7116 | 18.2 |
04/10/20 | 0.729 | 118.2536 | 16.8 |
04/17/20 | 0.657 | 119.0192 | 17.5 |
04/20/20 | 0.598 | 119.6473 | 18.2 |
05/01/20 | 0.637 | 119.2304 | 17.7 |
05/08/20 | 0.679 | 118.7832 | 17.3 |
05/15/20 | 0.641 | 119.1877 | 17.7 |
05/22/20 | 0.661 | 118.9747 | 17.5 |
05/29/20 | 0.649 | 119.1025 | 17.6 |
06/05/20 | 0.912 | 116.3365 | 14.9 |
06/12/20 | 0.700 | 118.5604 | 17.1 |
06/19/20 | 0.686 | 118.7089 | 17.2 |
06/26/20 | 0.643 | 119.1664 | 17.7 |
07/03/20 | 0.673 | 118.8470 | 17.4 |
07/10/20 | 0.632 | 119.2838 | 17.8 |
07/17/20 | 0.627 | 119.3372 | 17.9 |
07/24/20 | 0.587 | 119.7652 | 18.3 |
07/31/20 | 0.540 | 120.2704 | 18.8 |
08/07/20 | 0.567 | 119.9799 | 18.5 |
08/14/20 | 0.708 | 118.4756 | 17.0 |
08/21/20 | 0.633 | 119.2731 | 17.8 |
08/28/20 | 0.733 | 118.2111 | 16.7 |
09/04/20 | 0.722 | 118.3274 | 16.9 |
09/11/20 | 0.672 | 118.8576 | 17.4 |
09/18/20 | 0.689 | 118.6771 | 17.2 |
09/25/20 | 0.660 | 118.9853 | 17.5 |
10/02/20 | 0.698 | 118.5816 | 17.1 |
10/09/20 | 0.778 | 117.7366 | 16.3 |
10/16/20 | 0.738 | 118.1583 | 16.7 |
Note: price is calculated for an artificial 10-year note paying semi-annual coupon and maturing in ten years using the actual yields traded on the dates and the coupon of 2.625% on 11/04/10
Source:
http://professional.wsj.com/mdc/public/page/mdc_bonds.html?mod=mdc_topnav_2_3000
Table VI-7B provides the maturity distribution and average length in months of marketable interest-bearing debt held by private investors from 2007 to 2020. Total debt held by investors increased from $3635 billion in 2007 to $15,688 billion in Jun 2020 (Fiscal Year 2020) or increase by 331.6 percent. There are two concerns with the maturity distribution of US debt. (1) Growth of debt is moving total debt to the point of saturation in investors’ portfolio. In a new environment of risk appetite and nonzero fed funds rates with economic growth at historical trend of around 3 percent, yields on risk financial assets are likely to increase. Placement of new debt may require increasing interest rates in an environment of continuing placement of debt by the US Treasury without strong fiscal constraints. (2) Refinancing of maturing debt is likely to occur in an environment of higher interest rates, exerting pressure on future fiscal budgets. In Jun (fiscal year 2020), $6416 billion or 40.9 percent of outstanding debt held by investors matures in less than a year and $5442 billion or 34.7 percent of total debt matures in one to five years. Debt maturing in five years or less adds to $11,858 billion or 75.6 percent of total outstanding debt held by investors of $15,688 billion. This historical episode may be remembered as one in which the US managed its government debt with short-dated instruments during record low long-dated yields and on the verge of fiscal pressures on all interest rates. This strategy maximizes over time interest payments on government debt by taxpayers that is precisely the opposite of the objective of sound debt management and taxpayer welfare.
Table VI-7B, Maturity Distribution and Average Length in Months of Marketable Interest-Bearing Public Debt Held by Private Investors, Billions of Dollars
End of Fiscal Year or Month | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 |
Total* | 3635 | 4745 | 6229 | 7676 | 7951 | 9040 |
<1 Year | 1176 | 2042 | 2605 | 2480 | 2504 | 2897 |
1-5 Years | 1310 | 1468 | 2075 | 2956 | 3085 | 3852 |
5-10 Years | 678 | 719 | 995 | 1529 | 1544 | 1488 |
10-20 Years | 292 | 352 | 351 | 341 | 309 | 271 |
>20 Years | 178 | 163 | 204 | 371 | 510 | 533 |
Average | 58 | 49 | 49 | 57 | 60 | 55 |
End of Fiscal Year or Month | 2013 | 2014 | 2015 | 2016 | 2017 | |
Total* | 9518 | 9829 | 10379 | 11184 | 11643 | |
<1 Year | 2940 | 2932 | 2923 | 3321 | 3263 | |
1-5 Years | 4135 | 4217 | 4356 | 4478 | 4746 | |
5-10 Years | 1648 | 1814 | 2084 | 2219 | 2321 | |
10-20 Years | 231 | 223 | 184 | 168 | 152 | |
>20 Years | 565 | 644 | 832 | 998 | 1161 | |
Average | 55 | 56 | 61 | 63 | 66 | |
End of Fiscal Year or Month | 2018 | 2019 | 2020 Jun | |||
Total* | 12881 | 14225 | 15,688 | |||
<1 Year | 3794 | 4147 | 6416 | |||
1-5 Years | 5181 | 5822 | 5442 | |||
5-10 Years | 2445 | 2625 | 2287 | |||
10-20 Years | 121 | 105 | 166 | |||
>20 Years | 1339 | 1526 | 1376 | |||
Average | 65 | 65 | 55 |
*Amount Outstanding Privately Held
Source: United States Treasury. 2020 Sep. Treasury Bulletin. Washington, Dec
https://www.fiscal.treasury.gov/reports-statements/treasury-bulletin/
Table VI-7C provides additional information required for understanding the deficit/debt situation of the United States. The table is divided into four parts: Treasury budget in the 2020 fiscal year beginning on Oct 1, 2019 and ending on Sep 30, 2020; federal fiscal data for the years from 2009 to 2019; federal fiscal data for the years from 2005 to 2008; and Treasury debt held by the public from 2005 to 2019. Receipts decreased 1.3 percent in the cumulative fiscal year 2020 ending in Aug 2020 relative to the cumulative in fiscal year 2019. Individual income taxes decreased 5.7 percent relative to the same fiscal period a year earlier. Outlays increased 45.7 percent relative to a year earlier. There are also receipts, outlays, deficit and debt for fiscal years 2013, 2014, 2015, 2016, 2017, 2018 and 2019. In fiscal year 2019, the deficit reached $984.4 billion or 4.6 percent of GDP. Outlays of 4,446.6 billion were 21.0 percent of GDP and receipts of $3,462.2 billion were 16.3 percent of GDP. It is quite difficult for the US to raise receipts above 18 percent of GDP. Total revenues of the US from 2009 to 2012 accumulate to $9021.2 billion, or $9.0 trillion, while expenditures or outlays accumulate to $14,104.5 billion, or $14.1 trillion, with the deficit accumulating to $5083.3 billion, or $5.1 trillion. Revenues decreased 6.5 percent from $9652.5 billion in the four years from 2005 to 2008 to $9021.2 billion in the years from 2009 to 2012. Decreasing revenues were caused by the global recession from IVQ2007 (Dec) to IIQ2009 (Jun) and by growth of only 1.2 percent on average in the cyclical expansion from IIIQ2009 to IIQ2020. In contrast, the expansion from IQ1983 to IVQ1993 was at the average annual growth rate of 3.7 percent and at 7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2020/10/dollar-carry-trades-induced-from-zero.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/d-ollar-devaluation-and-yuan.html). Because of mediocre GDP growth, there are 32.7 million unemployed or underemployed in the United States for an effective unemployment/underemployment rate of 18.9 percent (https://cmpassocregulationblog.blogspot.com/2020/10/increasingvaluations-of-risk-financial.html and earlier https://cmpassocregulationblog.blogspot.com/2020/09/exchange-rate-fluctuations-1.html). Weakness of growth and employment creation is analyzed in II Collapse of United States Dynamism of Income Growth and Employment Creation (https://cmpassocregulationblog.blogspot.com/2020/07/contraction-of-household-wealth-by-14.html). In contrast with the decline of revenue, outlays or expenditures increased 30.1 percent from $10,838.2 billion, or $10.8 trillion, in the four years from 2005 to 2008, to $14,104.5 billion, or $14.1 trillion, in the four years from 2009 to 2012. Increase in expenditures by 30.1 percent while revenue declined by 6.5 percent caused the increase in the federal deficit from $1185.8 billion in 2005-2008 to $5083.3 billion in 2009-2012. Federal revenue was 14.8 percent of GDP on average in the years from 2009 to 2012, which is well below 17.3 percent of GDP on average from 1962 to 2019. Federal outlays were 23.3 percent of GDP on average from 2009 to 2012, which is well above 20.1 percent of GDP on average from 1962 to 2019. The lower part of Table VI-7C shows that debt held by the public swelled from $5803 billion in 2008 to $13,117 billion in 2015, by $7314 billion or 126.0 percent. Debt held by the public as percent of GDP or economic activity jumped from 39.4 percent in 2008 to 79.2 percent in 2019, which is well above the average of 41.7 percent from 1962 to 2019. The United States faces tough adjustment because growth is unlikely to recover, creating limits on what can be obtained by increasing revenues, while continuing stress of social programs restricts what can be obtained by reducing expenditures. The Congressional Budget Office (CBO) provides a preliminary estimate of the impact of Public Law 116-136 of Mar 27, 2020, CARES Act or Coronavirus Aid, Relief and Economic Security Act (https://www.cbo.gov/system/files/2020-04/hr748.pdf). This preliminary estimate finds that the CARES Act “will increase federal deficits by about $1.8 trillion over the 2020-2030 period (https://www.cbo.gov/system/files/2020-04/hr748.pdf).
Table VI-7C, US, Treasury Budget in Fiscal Year to Date Million Dollars
Aug 2020 | Fiscal Year 2020 | Fiscal Year 2019 | ∆% |
Receipts | 3,046,786 | 3,088,167 | -1.3 |
Outlays | 6,054,175 | 4,155,323 | 45.7 |
Deficit | -3,007,390 | -1,067,156 | |
Individual Income Tax | 1,447,184 | 1,534,886 | -5.7 |
Corporation Income Tax | 162,185 | 169,927 | -4.6 |
Social Insurance | 879,522 | 836,607 | 5.1 |
Receipts | Outlays | Deficit (-), Surplus (+) | |
$ Billions | |||
Fiscal Year 2019 | 3,462.2 | 4,446.6 | -984.4 |
% GDP | 16.3 | 21.0 | -4.6 |
Fiscal Year 2018 | 3,329.9 | 4,109.0 | -779.1 |
% GDP | 16.4 | 20.2 | -3.8 |
Fiscal Year 2017 | 3,316.2 | 3,981.6 | -665.4 |
% GDP | 17.2 | 20.6 | -3.5 |
Fiscal Year 2016 | 3,268.0 | 3,852.6 | -584.7 |
% GDP | 17.6 | 20.8 | -3.2 |
Fiscal Year 2015 | 3,249.9 | 3,691.8 | -442.0 |
% GDP | 18.0 | 20.4 | -2.4 |
Fiscal Year 2014 | 3,021.5 | 3,506.3 | -484.8 |
% GDP | 17.4 | 20.2 | -2.8 |
Fiscal Year 2013 | 2,775.1 | 3,454.9 | -679.8 |
% GDP | 16.7 | 20.8 | -4.1 |
Fiscal Year 2012 | 2,450.0 | 3,526.6 | -1,076.6 |
% GDP | 15.3 | 22.0 | -6.7 |
Fiscal Year 2011 | 2,303.5 | 3,603.1 | -1,299.6 |
% GDP | 15.0 | 23.4 | -8.4 |
Fiscal Year 2010 | 2,162.7 | 3,457.1 | -1,294.4 |
% GDP | 14.6 | 23.3 | -8.7 |
Fiscal Year 2009 | 2,105.0 | 3,517.7 | -1,412.7 |
% GDP | 14.6 | 24.4 | -9.8 |
Total 2009-2012 | 9,021.2 | 14,104.5 | -5,083.3 |
Average % GDP 2009-2012 | 14.8 | 23.3 | -8.4 |
Fiscal Year 2008 | 2,524.0 | 2,982.5 | -458.6 |
% GDP | 17.1 | 20.2 | -3.1 |
Fiscal Year 2007 | 2,568.0 | 2,728.7 | -160.7 |
% GDP | 18.0 | 19.1 | -1.1 |
Fiscal Year 2006 | 2,406.9 | 2,655.1 | -248.2 |
% GDP | 17.6 | 19.5 | -1.8 |
Fiscal Year 2005 | 2,153.6 | 2,472.0 | -318.3 |
% GDP | 16.8 | 19.3 | -2.5 |
Total 2005-2008 | 9,652.5 | 10,838.2 | -1,185.8 |
Average % GDP 2005-2008 | 17.4 | 19.5 | -2.1 |
Debt Held by the Public | Billions of Dollars | Percent of GDP | |
2005 | 4,592 | 35.8 | |
2006 | 4,829 | 35.4 | |
2007 | 5,035 | 35.2 | |
2008 | 5,803 | 39.4 | |
2009 | 7,545 | 52.3 | |
2010 | 9,019 | 60.8 | |
2011 | 10,128 | 65.8 | |
2012 | 11,281 | 70.3 | |
2013 | 11,983 | 72.2 | |
2014 | 12,780 | 73.7 | |
2015 | 13,117 | 72.5 | |
2016 | 14,168 | 76.4 | |
2017 | 14,666 | 76.0 | |
2018 | 15,750 | 77.4 | |
2019 | 16,803 | 79.2 |
Source: https://www.fiscal.treasury.gov/reports-statements/mts/
https://www.treasury.gov/press-center/press-releases/Pages/sm0184.aspx https://home.treasury.gov/news/press-releases/sm806 CBO, The budget and economic outlook: 2018 to 2028. Washington, DC, Apr 9 https://www.cbo.gov/publication/53651
CBO, The budget and economic outlook: 2017-2027. Washington, DC, Jan 24, 2017 https://www.cbo.gov/publication/52370 CBO, An update to the budget and economic outlook: 2016 to 2026. Washington, DC, Aug 23, 2016.
https://www.cbo.gov/about/products/budget-economic-data#6
CBO (2012NovMBR). CBO (2011AugBEO); Office of Management and Budget 2011. Historical Tables. Budget of the US Government Fiscal Year 2011. Washington, DC: OMB; CBO. 2011JanBEO. Budget and Economic Outlook. Washington, DC, Jan. CBO. 2012AugBEO. Budget and Economic Outlook. Washington, DC, Aug 22. CBO. 2012Jan31. Historical budget data. Washington, DC, Jan 31. CBO. 2012NovCDR. Choices for deficit reduction. Washington, DC. Nov. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO. 2013HBDFeb5. Historical budget data—February 2013 baseline projections. Washington, DC, Congressional Budget Office, Feb 5. CBO (2013Aug12). 2013AugHBD. Historical budget data—August 2013. Washington, DC, Congressional Budget Office, Aug. CBO, Historical Budget Data—February 2014, Washington, DC, Congressional Budget Office, Feb. CBO, Historical budget data—April 2014 release. Washington, DC, Congressional Budget Office, Apr. Congressional Budget Office, August 2014 baseline: an update to the budget and economic outlook: 2014 to 2024. Washington, DC, CBO, Aug 27, 2014. CBO, Monthly budget review: summary of fiscal year 2014. Washington, DC, Congressional Budget Office, Nov 10, 2014. CBO, The budget and economic outlook: 2015 to 2025. Washington, DC, Congressional Budget Office, Jan 26, 2015.
https://www.cbo.gov/about/products/budget-economic-data#6
https://www.cbo.gov/about/products/budget_economic_data#3 https://www.cbo.gov/about/products/budget_economic_data#2
Table VI-7E, US, Congressional Budget Office, 40-Year Averages of Revenues and Outlays Before and After Update of the US National Income Accounts by the Bureau of Economic Analysis, % of GDP
Before Update | After Update | |
Revenues | ||
Individual Income Taxes | 8.2 | 7.9 |
Social Insurance Taxes | 6.2 | 6.0 |
Corporate Income Taxes | 1.9 | 1.9 |
Other | 1.6 | 1.6 |
Total Revenues | 17.9 | 17.4 |
Outlays | ||
Mandatory | 10.2 | 9.9 |
Discretionary | 8.6 | 8.4 |
Net Interest | 2.2 | 2.2 |
Total Outlays | 21.0 | 20.4 |
Deficit | -3.1 | -3.0 |
Debt Held by the Public | 39.2 | 38.0 |
Source: CBO (2013Aug12Av). Kim Kowaleski and Amber Marcellino.
Table VI-7F provides the long-term budget outlook of the CBO for 2018, 2028 and 2048. Revenues increase from 16.6 percent of GDP in 2018 to 19.8 percent in 2047. The growing stock of debt raises net interest spending from 1.6 percent of GDP in 2018 to 3.8 percent in 2028 and 6.3 percent 2048. Total spending increases from 20.6 percent of GDP in 2018 to 29.3 percent in 2048. Federal debt held by the public rises to 152.0 percent of GDP in 2048. US fiscal affairs are in an unsustainable path with tough rigidities in spending and revenues.
Table IIA1-9, Congressional Budget Office, Long-term Budget Outlook, % of GDP
2018 | 2028 | 2048 | |
Revenues | 16.6 | 18.5 | 19.8 |
Total Noninterest Spending | 19.0 | 20.6 | 23.1 |
Social Security | 4.9 | 6.0 | 6.3 |
Medicare | 2.9 | 4.2 | 5.9 |
Medicaid, CHIP and Exchange Subsidies | 2.3 | 2.5 | 3.3 |
Other | 8.9 | 7.9 | 7.6 |
Net Interest | 1.6 | 3.1 | 6.3 |
Total Spending | 20.6 | 23.6 | 29.3 |
Revenues Minus Total Noninterest Spending | -2.4 | -2.1 | -3.3 |
Revenues Minus Total Spending | -3.9 | -5.1 | -9.5 |
Federal Debt Held by the Public | 78.0 | 96.0 | 152.0 |
Source: CBO, The 2018 long-term budget outlook. Washington, DC, Jun 26, 2018 https://www.cbo.gov/publication/53919
Chart IIA1-LTB18 of the CBO illustrates the rigidity of major health care programs and social security with limited upside potential in taxes.
Chart IIA1-LTB18, The extended baseline of CBO 2018-2048,
Source: CBO, The 2018 long-term budget outlook. Washington, DC, Jun 26, 2018 https://www.cbo.gov/publication/53919
Recovery of growth rates of the US economy is critical to resolving fiscal sustainability. The revealing Chart VI-7LTBO of the Congressional Budget Office (CBO) provides alternative paths of the debt/GDP ratio according to assumptions on the growth of productivity, federal borrowing rates and rates of excess cost growth for federal spending on Medicare and Medicaid. The extended baseline projects debt/GDP of 150.0 percent in 2047. With lower rate of growth of productivity, the debt/GDP ratio would increase to 244 percent in 2047. The debt/GDP ratio would be much lower at 85 percent in 2047 with higher rate of productivity growth.
Chart VI-LTBO, Congressional Budget Office, Paths of Federal Debt under Alternative Rates of Productivity Growth, Labor Force Participation and Other Assumptions
Source: Congressional Budget Office, The 2016 long-term budget outlook. Washington, DC, Jul 12 https://www.cbo.gov/publication/51580
Table VI-7G of the Congressional Budget Office (CBO) provides the data in Chart VI-LTBO. Economy policy must focus intensively on stimulating productivity growth that would recover the high rates of economic growth of the US over the long-term.
Table VI-7G, Congressional Budget Office, Long-term Budget Outlook, % of GDP, Alternative Paths of Federal Debt According to the Rate of Productivity Growth
Given Different Labor Force Participation Rates, Productivity Growth Rates, Federal Borrowing Rates, and Rates of Excess Cost Growth for Federal Spending on Medicare and Medicaida | |||
Extended Baseline | Given Rates That Lower | Given Rates That Raise | |
2000 | 34 | ||
2001 | 31 | ||
2002 | 33 | ||
2003 | 35 | ||
2004 | 36 | ||
2005 | 36 | ||
2006 | 35 | ||
2007 | 35 | ||
2008 | 39 | ||
2009 | 52 | ||
2010 | 61 | ||
2011 | 66 | ||
2012 | 70 | ||
2013 | 73 | ||
2014 | 74 | ||
2015 | 73 | ||
2016 | 77 | ||
2017 | 77 | 77 | 77 |
2018 | 77 | 76 | 79 |
2019 | 78 | 76 | 80 |
2020 | 79 | 76 | 82 |
2021 | 80 | 76 | 84 |
2022 | 81 | 77 | 86 |
2023 | 83 | 77 | 89 |
2024 | 84 | 77 | 91 |
2025 | 85 | 77 | 94 |
2026 | 87 | 78 | 97 |
2027 | 89 | 78 | 101 |
2028 | 91 | 78 | 105 |
2029 | 93 | 79 | 108 |
2030 | 95 | 79 | 113 |
2031 | 97 | 79 | 117 |
2032 | 99 | 80 | 122 |
2033 | 102 | 80 | 127 |
2034 | 105 | 81 | 133 |
2035 | 107 | 81 | 138 |
2036 | 110 | 82 | 145 |
2037 | 113 | 82 | 151 |
2038 | 116 | 83 | 158 |
2039 | 120 | 83 | 165 |
2040 | 123 | 84 | 173 |
2041 | 127 | 84 | 182 |
2042 | 130 | 84 | 190 |
2043 | 134 | 85 | 200 |
2044 | 138 | 85 | 210 |
2045 | 142 | 85 | 220 |
2046 | 146 | 85 | 232 |
2047 | 150 | 85 | 244 |
Source: CBO, The 2017 Long-term Budget Outlook. Washington, DC, Mar 30, 2017 https://www.cbo.gov/publication/52480 https://www.cbo.gov/about/products/budget-economic-data#1
Chart VI-8 of the Board of Governors of the Federal Reserve System provides the yield of the ten-year constant maturity Treasury and the overnight fed funds rate from Jan 2, 1962 to Oct 15, 2020. The yield of the ten-year constant maturity Treasury stood at 7.67 percent on Feb 16, 1977. A peak was reached at 15.21 percent on Oct 26, 1981 during the inflation control effort by the Fed. There is a second local peak in Chart VI-8 on May 3, 1984 at 13.94 percent followed by another local peak at 8.14 percent on Nov 21, 1994 during another inflation control effort (see Appendix I The Great Inflation). There was sharp reduction of the yields from 5.44 percent on Apr 1, 2002 until they reached a low point of 3.13 percent on Jun 13, 2003. The fed funds rate was 1.18 percent on Jun 23, 2003 and the ten-year yield 3.36 percent. Yields rose again to 4.89 percent on Jun 14, 2004 with the fed funds rate at 1.02 percent and the ten-year yield stood at 5.23 percent on Jul 5, 2006. At the onset of the financial crisis on Sep 17, 2007, the fed funds rate was 5.33 percent and the ten-year yield 4.48 percent. On Dec 26, 2008, the fed funds rate was 0.09 percent and the ten-year yield 2.16 percent. Yields declined sharply during the financial crisis, reaching 2.08 percent on Dec 18, 2008, lowered by higher prices originating in sharply increasing demand in the flight to the US dollar and obligations of the US government. Yields rose again to 4.01 percent on Apr 5, 2010 but collapsed to 2.41 percent on Oct 8, 2010 because of higher demand originating in the flight from the European sovereign risk event. During higher risk appetite, yields rose to 3.75 percent on Feb 8, 2011 and reached 0.74 percent on Oct 15, 2020 with the fed funds rate at 0.09 percent. Chart VI-8A provides the fed funds rate and the yield of the ten-year constant maturity Treasury from Jan 2, 2001 to Oct 15, 2020. The final data point for Oct 15, 2020, shows the fed funds rate at 0.09 percent and the yield of the ten-year constant maturity Treasury at 0.74 percent. There has been a trend of decline of yields with oscillations. During periods of risk aversion investors seek protection in obligations of the US government, causing decline in their yields. In an eventual resolution of international financial risks with higher economic growth, there could be the trauma of rising yields with significant capital losses in portfolios of government securities. The data in Table VI-7 in the text is obtained from closing dates in New York published by the Wall Street Journal (http://professional.wsj.com/mdc/public/page/marketsdata.html?mod=WSJ_PRO_hps_marketdata).
Chart VI-8, US, Overnight Federal Funds Rate and Ten-Year Treasury Constant Maturity Yield, Jan 2, 1962 to Oct 15, 2020
Note: US Recessions in Shaded Areas
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15
Chart VI-8A provides the fed funds rate and the yield of the ten-year constant maturity Treasury from Jan 2, 2001 to Oct 15, 2020. The final data point for Oct 15, 2020, shows the fed funds rate at 0.09 percent and the yield of the ten-year constant maturity Treasury at 0.74 percent. There has been a trend of decline of yields with oscillations. During periods of risk aversion investors seek protection in obligations of the US government, causing decline in their yields. In an eventual resolution of international financial risks with higher economic growth, there could be the trauma of rising yields with significant capital losses in portfolios of government securities. The data in Table VI-7 in the text is obtained from closing dates in New York published by the Wall Street Journal (http://professional.wsj.com/mdc/public/page/marketsdata.html?mod=WSJ_PRO_hps_marketdata).
Chart VI-8A, US, Overnight Federal Funds Rate and Ten-Year Treasury Constant Maturity Yield, Jan 2, 2001 to Oct 15, 2020
Note: US Recessions in Shaded Areas
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15
Chart VI-9 of the Board of Governors of the Federal Reserve System provides securities held outright by Federal Reserve banks from 2002 to 2020. The first data point in Chart VI-9 is the level for Dec 18, 2002 of $629,407 million and the final data point in Chart VI-9 is level of $6,534,164 million on Oct 14, 2020. On October 25, 2017, at the beginning of the FOMC programmed reduction of the balance sheet, Total Assets of Federal Reserve Banks stood at $4,461,117 million. Total Assets increased $2,690,309 million from $4,461,117 on Oct 25, 2017 to $7,151,426 on Oct 14, 2020. Total Assets of Federal Reserve Banks increased from $3,981,420 million on Feb 20, 2019 to $7,151,426 million on Oct 14, 2020 by $3,170,006 million or 79.6 percent. The policy of reducing the fed funds policy rate requires increasing the balance sheet. The line “Securities Held Outright” increased from $4,019,823 million on Oct 25, 2017 to $6,534,164 on Oct 14, 2020 or $2,514,341 million. Securities Held Outright increased from $3,617,939 million on Jul 24, 2019 to $6,534,164 on Oct 14, 2020 by $2,916,225 million or 80.6 percent. The Chair of the Federal Reserve Board, Jerome H. Powell, at the 61st Annual Meeting on the National Association for Business Economics, on Oct 28, 2019, in Denver, Colorado, stated (https://www.federalreserve.gov/newsevents/speech/powell20191008a.htm): “Reserve balances are one among several items on the liability side of the Federal Reserve's balance sheet, and demand for these liabilities—notably, currency in circulation—grows over time. Hence, increasing the supply of reserves or even maintaining a given level over time requires us to increase the size of our balance sheet. As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves.18 That time is now upon us.
I want to emphasize that growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis. Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy, to which I now turn.”
Chart VI-9, US, Securities Held Outright by Federal Reserve Banks, Wednesday Level, Dec 23, 2002 to Oct 14, 2020, USD Millions
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/monetarypolicy/bst_fedsbalancesheet.htm
Chart VI-9A of the Board of Governors of the Federal Reserve System provides Total Assets by Federal Reserve banks from 2002 to 2020 (https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H41). The first data point in Chart VI-9A is the level for Dec 18, 2002 of $720,761 million and the final data point in Chart VI-9A is level of $7,151,426 million on Oct 14, 2020. On October 25, 2017, at the beginning of the FOMC programmed reduction of the balance sheet, Total Assets of Federal Reserve Banks stood at $4,461,117 million. Total Assets increased $2,690,309 million from $4,461,117 on Oct 25, 2017 to $7,151,426 on Oct 14, 2020. Total Assets of Federal Reserve Banks increased from $3,981,420 million on Feb 20, 2019 to $7,151,426 million on Oct 14, 2020, by $3,170,006 million or 79.6 percent. The policy of reducing the fed funds policy rate requires increasing the balance sheet. The Chair of the Federal Reserve Board, Jerome H. Powell, at the 61st Annual Meeting on the National Association for Business Economics, on Oct 28, 2019, in Denver, Colorado, stated (https://www.federalreserve.gov/newsevents/speech/powell20191008a.htm): “Reserve balances are one among several items on the liability side of the Federal Reserve's balance sheet, and demand for these liabilities—notably, currency in circulation—grows over time. Hence, increasing the supply of reserves or even maintaining a given level over time requires us to increase the size of our balance sheet. As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves.18 That time is now upon us.
I want to emphasize that growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis. Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy, to which I now turn.”
Chart VI-9A, US, Total Assets by Federal Reserve Banks, Wednesday Level, Dec 18, 2002 to Oct 14, USD Millions
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/monetarypolicy/bst_fedsbalancesheet.htm
Chart VI-10 of the Board of Governors of the Federal Reserve System provides the overnight Fed funds rate on business days from Jul 1, 1954 at 1.13 percent through Jan 10, 1979, at 9.91 percent per year, to Oct 15, 2020, at 0.09 percent per year. US recessions are in shaded areas according to the reference dates of the NBER (http://www.nber.org/cycles.html). In the Fed effort to control the “Great Inflation” of the 1970s (http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html https://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html https://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html), the fed funds rate increased from 8.34 percent on Jan 3, 1979 to a high in Chart VI-10 of 22.36 percent per year on Jul 22, 1981 with collateral adverse effects in the form of impaired savings and loans associations in the United States, emerging market debt and money-center banks (see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 72-7; Pelaez 1986, 1987). Another episode in Chart VI-10 is the increase in the fed funds rate from 3.15 percent on Jan 3, 1994, to 6.56 percent on Dec 21, 1994, which also had collateral effects in impairing emerging market debt in Mexico and Argentina and bank balance sheets in a world bust of fixed income markets during pursuit by central banks of non-existing inflation (Pelaez and Pelaez, International Financial Architecture (2005), 113-5). Another interesting policy impulse is the reduction of the fed funds rate from 7.03 percent on Jul 3, 2000, to 1.00 percent on Jun 22, 2004, in pursuit of equally non-existing deflation (Pelaez and Pelaez, International Financial Architecture (2005), 18-28, The Global Recession Risk (2007), 83-85), followed by increments of 25 basis points from Jun 2004 to Jun 2006, raising the fed funds rate to 5.25 percent on Jul 3, 2006 in Chart VI-10. Central bank commitment to maintain the fed funds rate at 1.00 percent induced adjustable-rate mortgages (ARMS) linked to the fed funds rate. Lowering the interest rate near the zero bound in 2003-2004 caused the illusion of permanent increases in wealth or net worth in the balance sheets of borrowers and also of lending institutions, securitized banking and every financial institution and investor in the world. The discipline of calculating risks and returns was seriously impaired. The objective of monetary policy was to encourage borrowing, consumption and investment but the exaggerated stimulus resulted in a financial crisis of major proportions as the securitization that had worked for a long period was shocked with policy-induced excessive risk, imprudent credit, high leverage and low liquidity by the incentive to finance everything overnight at interest rates close to zero, from adjustable rate mortgages (ARMS) to asset-backed commercial paper of structured investment vehicles (SIV).
The consequences of inflating liquidity and net worth of borrowers were a global hunt for yields to protect own investments and money under management from the zero interest rates and unattractive long-term yields of Treasuries and other securities. Monetary policy distorted the calculations of risks and returns by households, business and government by providing central bank cheap money. Short-term zero interest rates encourage financing of everything with short-dated funds, explaining the SIVs created off-balance sheet to issue short-term commercial paper with the objective of purchasing default-prone mortgages that were financed in overnight or short-dated sale and repurchase agreements (Pelaez and Pelaez, Financial Regulation after the Global Recession, 50-1, Regulation of Banks and Finance, 59-60, Globalization and the State Vol. I, 89-92, Globalization and the State Vol. II, 198-9, Government Intervention in Globalization, 62-3, International Financial Architecture, 144-9). ARMS were created to lower monthly mortgage payments by benefitting from lower short-dated reference rates. Financial institutions economized in liquidity that was penalized with near zero interest rates. There was no perception of risk because the monetary authority guaranteed a minimum or floor price of all assets by maintaining low interest rates forever or equivalent to writing an illusory put option on wealth. Subprime mortgages were part of the put on wealth by an illusory put on house prices. The housing subsidy of $221 billion per year created the impression of ever-increasing house prices. The suspension of auctions of 30-year Treasuries was designed to increase demand for mortgage-backed securities, lowering their yield, which was equivalent to lowering the costs of housing finance and refinancing. Fannie and Freddie purchased or guaranteed $1.6 trillion of nonprime mortgages and worked with leverage of 75:1 under Congress-provided charters and lax oversight. The combination of these policies resulted in high risks because of the put option on wealth by near zero interest rates, excessive leverage because of cheap rates, low liquidity because of the penalty in the form of low interest rates and unsound credit decisions because the put option on wealth by monetary policy created the illusion that nothing could ever go wrong, causing the credit/dollar crisis and global recession (Pelaez and Pelaez, Financial Regulation after the Global Recession, 157-66, Regulation of Banks, and Finance, 217-27, International Financial Architecture, 15-18, The Global Recession Risk, 221-5, Globalization and the State Vol. II, 197-213, Government Intervention in Globalization, 182-4). A final episode in Chart VI-10 is the reduction of the fed funds rate from 5.41 percent on Aug 9, 2007, to 2.97 percent on October 7, 2008, to 0.12 percent on Dec 5, 2008 and close to zero throughout a long period with the final point at 0.09 percent on Oct 15, 2020. Evidently, this behavior of policy would not have occurred had there been theory, measurements and forecasts to avoid these violent oscillations that are clearly detrimental to economic growth and prosperity without inflation. The Chair of the Board of Governors of the Federal Reserve System, Janet L. Yellen, stated on Jul 10, 2015 that (http://www.federalreserve.gov/newsevents/speech/yellen20150710a.htm):
“Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalizing monetary policy. But I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step. I currently anticipate that the appropriate pace of normalization will be gradual, and that monetary policy will need to be highly supportive of economic activity for quite some time. The projections of most of my FOMC colleagues indicate that they have similar expectations for the likely path of the federal funds rate. But, again, both the course of the economy and inflation are uncertain. If progress toward our employment and inflation goals is more rapid than expected, it may be appropriate to remove monetary policy accommodation more quickly. However, if progress toward our goals is slower than anticipated, then the Committee may move more slowly in normalizing policy.”
There is essentially the same view in the Testimony of Chair Yellen in delivering the Semiannual Monetary Policy Report to the Congress on Jul 15, 2015 (http://www.federalreserve.gov/newsevents/testimony/yellen20150715a.htm). The FOMC (Federal Open Market Committee) raised the fed funds rate to ¼ to ½ percent at its meeting on Dec 16, 2015 (http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm).
It is a forecast mandate because of the lags in effect of monetary policy impulses on income and prices (Romer and Romer 2004). The intention is to reduce unemployment close to the “natural rate” (Friedman 1968, Phelps 1968) of around 5 percent and inflation at or below 2.0 percent. If forecasts were reasonably accurate, there would not be policy errors. A commonly analyzed risk of zero interest rates is the occurrence of unintended inflation that could precipitate an increase in interest rates similar to the Himalayan rise of the fed funds rate from 9.91 percent on Jan 10, 1979, at the beginning in Chart VI-10, to 22.36 percent on Jul 22, 1981. There is a less commonly analyzed risk of the development of a risk premium on Treasury securities because of the unsustainable Treasury deficit/debt of the United States (https://cmpassocregulationblog.blogspot.com/2018/10/global-contraction-of-valuations-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/mediocre-cyclical-economic-growth-with.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-yields-and-dollar-revaluation.html http://cmpassocregulationblog.blogspot.com/2016/07/unresolved-us-balance-of-payments.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-reducing.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/weakening-equities-and-dollar.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/monetary-policy-designed-on-measurable.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html
and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html and earlier (http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html). There is not a fiscal cliff or debt limit issue ahead but rather free fall into a fiscal abyss. The combination of the fiscal abyss with zero interest rates could trigger the risk premium on Treasury debt or Himalayan hike in interest rates.
Chart VI-10, US, Fed Funds Rate, Business Days, Jul 1, 1954 to Oct 15, 2020, Percent per Year
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15
Chart VI-11 of the Board of Governors of the Federal Reserve System provides the fed funds rate and the prime bank loan rate in business days from Aug 4, 1955 to Oct 15, 2020. The overnight fed funds rate was 2.0 percent on Aug 4, 1955 and the bank prime rate 3.25 percent. The fed funds overnight rate is the rate charged by a depository institution with idle reserves deposited at a federal reserve bank to exchange its deposits overnight to another depository institution in need of reserves. In a sense, it is the marginal cost of funding for a bank in the United States, or the cost of a unit of additional funding. The fed funds rate is the rate charged by a bank to another bank in an uncollateralized overnight loan. The fed funds rate is the traditional policy rate or rate used to implement policy directives of the Federal Open Market Committee (FOMC). Thus, there should be an association between the fed funds rate or cost of funding of a bank and its prime lending rate. Such an association is verified in Chart VI-11 with the rates moving quite closely over time. On January 10, 1979, the fed funds rate was set at 9.91 percent and banks set their prime lending rate at 11.75 percent. On Dec 16, 2008, the policy determining committee of the Fed decided (http://www.federalreserve.gov/newsevents/press/monetary/20081216b.htm): “The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to ¼ percent.” On Dec 14, 2016 (https://www.federalreserve.gov/newsevents/press/monetary/20161214a.htm), “the Committee decided to raise the target level for the federal funds rate to ½ to ¾ percent.” On Mar 15, 2017, “the Committee decided to raise the federal funds rate to ¾ to 1 percent (https://www.federalreserve.gov/newsevents/pressreleases/monetary20170315a.htm). The FOMC raised the fed funds rate to 1 to 1 ¼ percent at its meeting on Jun 14, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20170201a.htm). The FOMC increased the fed funds rate to 1¼ to 1½ percent on Dec 13, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20171213a.htm). The FOMC increased the fed funds rate to 1½ to 1¾ percent on Mar 21, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180321a.htm). The FOMC increased the fed funds rate to 1¾ to 2.0 percent on Jun 13, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180613a.htm). The FOMC increased the fed funds rate to 2.0 to 2¼ percent on Sep 26, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180926a.htm). The FOMC increased the fed funds rate to 2¼ to 2½ percent on Dec 19, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20181219a.htm). The FOMC decreased the fed funds rate to 2 to 2¼ percent on Jul 31, 2019 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20190731a.htm). The FOMC decreased the fed funds rate to 1¾ to 2.0 percent on Sep 18, 2019 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20190918a.htm).
The FOMC decreased the fed funds rate to 1½ to 1¾ percent on Oct 30, 2019 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20191030a.htm). The FOMC decreased the fed funds rate to 1 to 1¼ percent on Mar 3, 2020 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20200303a.htm). The FOMC decreased the fed funds rate to 0 to ¼ percent on Mar 15, 2020 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm). On Aug 27, 2020, the Federal Open Market Committee changed its Longer-Run Goals and Monetary Policy Strategy, including the following (https://www.federalreserve.gov/monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications-statement-on-longer-run-goals-monetary-policy-strategy.htm): “The Committee judges that longer-term inflation expectations that are well anchored at 2 percent foster price stability and moderate long-term interest rates and enhance the Committee's ability to promote maximum employment in the face of significant economic disturbances. In order to anchor longer-term inflation expectations at this level, the Committee seeks to achieve inflation that averages 2 percent over time, and therefore judges that, following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.” The new policy can affect relative exchange rates depending on relative inflation rates and country risk issues.
The final segment of Chart VI-11 shows similar movement of the fed funds rate and the prime bank loan rate following the fixing of the fed funds rate to approximately zero. In the final data point of Chart VI-11 on Oct 15, 2020, the fed funds rate is 0.09 percent and the prime rate 3.25 percent. The causes of the financial crisis and global recession were interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero-interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash. The yields of Treasury securities inverted on Mar 22, 2019 with the ten-year yield at 2.44 percent below those of 2.49 percent for one-month, 2.48 percent for two months, 2.46 percent for three months, 2.48 percent for six months and 2.45 percent for one year (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield). The final segment after 2001 shows the effects of unconventional monetary policy of extremely low, below inflation fed funds rate in lowering yields. This was an important cause of the global recession and financial crisis inducing as analyzed by Taylor (2018Oct 19, 2) “search for yield, excessive risk taking, a boom and bust in the housing market, and eventually the financial crisis and recession.” Monetary policy deviated from the Taylor Rule (Taylor 2018Oct19 see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB, 2019Oct19 and http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html)). An explanation is in the research of Adrian, Estrella and Shin (2018, 21-22): “Our findings suggest that the monetary tightening of 2004-2006 period ultimately did achieve a slowdown in real activity not because of its impact on the level of longer term interest rates, but rather because of its impact on the slope of the yield curve. In fact, while the level of the 10-year yield only increased 38 basis points between June 2004 and 2006, the term spread declined 325 basis points (from 3.44 to .19 percent). The fact that the slope flattened meant that intermediary profitability was compressed, thus shifting the supply of credit, and hence inducing changes in real activity. The 18 month lag between the end of the tightening cycle, and the beginning of the recession is perfectly compatible with effective monetary tightening.” See (https://www.newyorkfed.org/research/capital_markets/ycfaq.html). A major difference in the current cycle is the balance sheet of the Fed with purchases used to lower interest rates in specific segments and maturities such as mortgage-backed securities and longer terms.
Chart VI-11, US, Fed Funds Rate and Prime Bank Loan, Aug 4, 1955 to Oct 15, 2020, Percent per Year
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15
Lending has become more complex over time. The critical fact of current world financial markets is the combination of “unconventional” monetary policy with intermittent shocks of financial risk aversion. There are two interrelated unconventional monetary policies. First, unconventional monetary policy consists of (1) reducing short-term policy interest rates toward the “zero bound” such as fixing the fed funds rate at 0 to ¼ percent by decision of the Federal Open Market Committee (FOMC) since Dec 16, 2008 (http://www.federalreserve.gov/newsevents/press/monetary/20081216b.htm). Second, unconventional monetary policy also includes a battery of measures to also reduce long-term interest rates of government securities and asset-backed securities such as mortgage-backed securities. When inflation is low, the central bank lowers interest rates to stimulate aggregate demand in the economy, which consists of consumption and investment. When inflation is subdued and unemployment high, monetary policy would lower interest rates to stimulate aggregate demand, reducing unemployment. When interest rates decline to zero, unconventional monetary policy would consist of policies such as large-scale purchases of long-term securities to lower their yields. A major portion of credit in the economy is financed with long-term asset-backed securities. Loans for purchasing houses, automobiles and other consumer products are bundled in securities that in turn are sold to investors. Corporations borrow funds for investment by issuing corporate bonds. Loans to small businesses are also financed by bundling them in long-term bonds. Securities markets bridge the needs of higher returns by investors obtaining funds from savers that are channeled to consumers and business for consumption and investment. Lowering the yields of these long-term bonds could lower costs of financing purchases of consumer durables and investment by business. The essential mechanism of transmission from lower interest rates to increases in aggregate demand is portfolio rebalancing. Withdrawal of bonds in a specific maturity segment or directly in a bond category such as currently mortgage-backed securities causes reductions in yield that are equivalent to increases in the prices of the bonds. There can be secondary increases in purchases of those bonds in private portfolios in pursuit of their increasing prices. Lower yields translate into lower costs of buying homes and consumer durables such as automobiles and also lower costs of investment for business.
Monetary policy can lower short-term interest rates quite effectively. Lowering long-term yields is somewhat more difficult. The critical issue is that monetary policy cannot ensure that increasing credit at low interest cost increases consumption and investment. There is a large variety of possible allocation of funds at low interest rates from consumption and investment to multiple risk financial assets. Monetary policy does not control how investors will allocate asset categories. A critical financial practice is to borrow at low short-term interest rates to invest in high-risk, leveraged financial assets. Investors may increase in their portfolios asset categories such as equities, emerging market equities, high-yield bonds, currencies, commodity futures and options and multiple other risk financial assets including structured products. If there is risk appetite, the carry trade from zero interest rates to risk financial assets will consist of short positions at short-term interest rates (or borrowing) and short dollar assets with simultaneous long positions in high-risk, leveraged financial assets such as equities, commodities and high-yield bonds. Low interest rates may induce increases in valuations of risk financial assets that may fluctuate in accordance with perceptions of risk aversion by investors and the public. During periods of muted risk aversion, carry trades from zero interest rates to exposures in risk financial assets cause temporary waves of inflation that may foster instead of preventing financial instability (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/06/fomc-interest-rate-increase-planned.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/dollar-devaluation-world-inflation.html). During periods of risk aversion such as fears of disruption of world financial markets and the global economy resulting from collapse of the European Monetary Union, carry trades are unwound with sharp deterioration of valuations of risk financial assets. More technical discussion is in IA Appendix: Transmission of Unconventional Monetary Policy at http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html.
Chart VI-12 of the Board of Governors of the Federal Reserve System provides the fed funds rate, prime bank loan rate and the yield of a corporate bond rated Baa by Moody’s. On Jan 10, 1979, the fed funds rate was fixed at 9.91 percent and banks fixed the prime loan rate at 11.75 percent. Reflecting differences in risk, the fed funds rate was 8.76 percent on Jan 2, 1986, the prime rate 9.50 percent and the Baa Corporate bond yield 11.38 percent. The yield of the Baa corporate bond collapsed toward the bank prime loan rate after the end of extreme risk aversion in the beginning of 2009. The final data point in Chart VI-12 is for Jul 7, 2016, with the fed funds rate at 0.40 percent, the bank prime rate at 3.50 percent and the yield of the Baa corporate bond at 4.19 percent. Empirical tests of the transmission of unconventional monetary policy to actual increases in consumption and investment or aggregate demand find major hurdles (see IA Appendix: Transmission of Unconventional Monetary Policy at http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html).
http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html).
Chart VI-12, US, Fed Funds Rate, Prim Bank Loan Rate and Yield of Moody’s Baa Corporate Bond, Business Days, Aug 4, 1955 to Jul 7, 2016, Percent per Year
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15
Chart VI-12A of the Board of Governors of the Federal Reserve System provides the overnight fed funds rate and the bank prime rate on business days from Jan 5, 2007 to Oct 15, 2020. There is a jump in the rates and yield with the increase in fed funds rates target range from 0 to ½ percent to ¼ to ½ percent on Dec 16, 2015 by the Federal Open Market Committee (http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm), ½ to ¾ percent on Dec 14, 2016 (https://www.federalreserve.gov/newsevents/press/monetary/20161214a.htm) and ¾ to 1 percent on Mar 15, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20170315a.htm). The FOMC raised the fed funds rate to 1 to 1¼ percent at its meeting on Jun 14, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20170201a.htm). The FOMC increased the fed funds rate to 1¼ to 1½ percent on Dec 13, 2017 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20171213a.htm). The FOMC increased the fed funds rate to 1½ to 1¾ percent on Mar 21, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180321a.htm). The FOMC increased the fed funds rate to 1¾ to 2.0 percent on Jun 13, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180613a.htm). The FOMC increased the fed funds rate to 2.0 to 2¼ percent on Sep 26, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20180926a.htm). The FOMC increased the fed funds rate to 2¼ to 2½ percent on Dec 19, 2018 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20181219a.htm). The FOMC decreased the fed funds rate to 2 to 2¼ on Jul 31, 2019 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20190731a.htm). The FOMC decreased the fed funds rate to 1¾ to 2.0 percent on Sep 18, 2019 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20190918a.htm). The FOMC decreased the fed funds rate to 1½ to 1¾ on Oct 30, 2019 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20191030a.htm). The FOMC decreased the fed funds rate to 1 to 1¼ percent on Mar 3, 2020 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20200303a.htm). The FOMC decreased the fed funds rate to 0 to ¼ percent on Mar 15, 2020 (https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315a.htm). On Aug 27, 2020, the Federal Open Market Committee changed its Longer-Run Goals and Monetary Policy Strategy, including the following (https://www.federalreserve.gov/monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications-statement-on-longer-run-goals-monetary-policy-strategy.htm): “The Committee judges that longer-term inflation expectations that are well anchored at 2 percent foster price stability and moderate long-term interest rates and enhance the Committee's ability to promote maximum employment in the face of significant economic disturbances. In order to anchor longer-term inflation expectations at this level, the Committee seeks to achieve inflation that averages 2 percent over time, and therefore judges that, following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.” The new policy can affect relative exchange rates depending on relative inflation rates and country risk issues. The final segment of Chart VI-11 shows similar movement of the fed funds rate and the prime bank loan rate following the fixing of the fed funds rate to approximately zero. In the final data point of Chart VI-12A on Oct 15, 2020, the fed funds rate is 0.09 percent and the prime rate 3.25 percent. The causes of the financial crisis and global recession were interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero-interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash. The yields of Treasury securities inverted on Mar 22, 2019 with the ten-year yield at 2.44 percent below those of 2.49 percent for one-month, 2.48 percent for two months, 2.46 percent for three months, 2.48 percent for six months and 2.45 percent for one year (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield). Unconventional monetary policy of extremely low interest rates was an important cause of the global recession and financial crisis inducing as analyzed by Taylor (2018Oct 19, 2) “search for yield, excessive risk taking, a boom and bust in the housing market, and eventually the financial crisis and recession.” Monetary policy deviated from the Taylor Rule (Taylor 2018Oct19 see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB, 2019Oct19 and http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html)). An explanation is in the research of Adrian, Estrella and Shin (2018, 21-22): “Our findings suggest that the monetary tightening of 2004-2006 period ultimately did achieve a slowdown in real activity not because of its impact on the level of longer term interest rates, but rather because of its impact on the slope of the yield curve. In fact, while the level of the 10-year yield only increased 38 basis points between June 2004 and 2006, the term spread declined 325 basis points (from 3.44 to .19 percent). The fact that the slope flattened meant that intermediary profitability was compressed, thus shifting the supply of credit, and hence inducing changes in real activity. The 18 month lag between the end of the tightening cycle, and the beginning of the recession is perfectly compatible with effective monetary tightening.” See (https://www.newyorkfed.org/research/capital_markets/ycfaq.html). A major difference in the current cycle is the balance sheet of the Fed with purchases used to lower interest rates in specific segments and maturities such as mortgage-backed securities and longer terms.
Chart VI-12A, US, Fed Funds Rate and Prime Bank Loan Rate, Business Days, Jan 5, 2007 to Oct 15, 2020, Percent per Year
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15
Chart VI-12B of the Board of Governors of the Federal Reserve System provides the fed funds rate and prime bank loan rate on business days from Jan 2, 2001 to Oct 15, 2020. The behavior over time is that of controlled interest rates. Unconventional monetary policy with zero interest rates and quantitative easing is quite difficult to unwind because of the adverse effects of raising interest rates on valuations of risk financial assets and home prices, including the very own valuation of the securities held outright in the Fed balance sheet. Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero-interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash. The final segment shows the repetition of this policy with minute increases in interest rates. The causes of the financial crisis and global recession were interest rate and housing subsidies and affordability policies that encouraged high leverage and risks, low liquidity and unsound credit (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4). Several past comments of this blog elaborate on these arguments, among which: http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero-interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash. The yields of Treasury securities inverted on Mar 22, 2019 with the ten-year yield at 2.44 percent below those of 2.49 percent for one-month, 2.48 percent for two months, 2.46 percent for three months, 2.48 percent for six months and 2.45 percent for one year (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield). The final segment after 2001 shows the effects of unconventional monetary policy of extremely low, below inflation fed funds rate in lowering yields. This was an important cause of the global recession and financial crisis inducing as analyzed by Taylor (2018Oct 19, 2) “search for yield, excessive risk taking, a boom and bust in the housing market, and eventually the financial crisis and recession.” Monetary policy deviated from the Taylor Rule (Taylor 2018Oct19 see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB, 2019Oct19 and http://cmpassocregulationblog.blogspot.com/2017/01/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html)). An explanation is in the research of Adrian, Estrella and Shin (2018, 21-22): “Our findings suggest that the monetary tightening of 2004-2006 period ultimately did achieve a slowdown in real activity not because of its impact on the level of longer term interest rates, but rather because of its impact on the slope of the yield curve. In fact, while the level of the 10-year yield only increased 38 basis points between June 2004 and 2006, the term spread declined 325 basis points (from 3.44 to .19 percent). The fact that the slope flattened meant that intermediary profitability was compressed, thus shifting the supply of credit, and hence inducing changes in real activity. The 18 month lag between the end of the tightening cycle, and the beginning of the recession is perfectly compatible with effective monetary tightening.” See (https://www.newyorkfed.org/research/capital_markets/ycfaq.html). A major difference in the current cycle is the balance sheet of the Fed with purchases used to lower interest rates in specific segments and maturities such as mortgage-backed securities and longer terms.
Chart VI-12B, US, Fed Funds Rate and Prime Bank Loan Rate, Business Days, Jan 2, 2001 to Oct 15, 2020, Percent per Year
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/datadownload/Choose.aspx?rel=H15
Interest rate risk in the US is showing amplifying fluctuations. Chart VI-13 of the Board of Governors provides the conventional mortgage rate for a fixed-rate 30-year mortgage. The rate stood at 5.87 percent on Jan 8, 2004, increasing to 6.79 percent on Jul 6, 2006. The rate bottomed at 3.35 percent on May 2, 2013. Fear of duration risk in longer maturities such as mortgage-backed securities caused continuing increases in the conventional mortgage rate that rose to 4.51 percent on Jul 11, 2013, 4.58 percent on Aug 22, 2013 and 3.42 percent on Oct 6, 2016, which is the last data point in Chart VI-13. The thirty-year mortgage rate was 2.81 percent on Oct 15, 2020 (http://www.freddiemac.com/finance/ http://www.freddiemac.com/pmms/index.html). The current decline of yields is encouraging a surge in mortgage applications that could be reversed in a new increase. Shayndi Raice and Nick Timiraos, writing on “Banks cut as mortgage boom ends,” on Jan 16, 2014, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702303754404579310940019239208), analyze the drop in mortgage applications to a 13-year low, as measured by the Mortgage Bankers Association. Nick Timiraos, writing on “Demand for home loans plunges,” on Apr 24, 2014, published in the Wall Street Journal (http://online.wsj.com/news/articles/SB10001424052702304788404579522051733228402?mg=reno64-wsj), analyzes data in Inside Mortgage Finance that mortgage lending of $235 billion in IQ2014 is 58 percent lower than a year earlier and 23 percent below IVQ2013. Mortgage lending collapsed to the lowest level in 14 years. In testimony before the Committee on the Budget of the US Senate on May 8, 2004, Chair Yellen provides analysis of the current economic situation and outlook (http://www.federalreserve.gov/newsevents/testimony/yellen20140507a.htm): “One cautionary note, though, is that readings on housing activity--a sector that has been recovering since 2011--have remained disappointing so far this year and will bear watching.”
Chart VI-13, US, Conventional Mortgage Rate, Jan 8, 2004 to Oct 6, 2016
Source: Board of Governors of the Federal Reserve System
http://www.federalreserve.gov/releases/h15/update
Table IIB-8, US, Fed Funds Rate, Thirty Year Treasury Bond and Conventional Mortgage Rate, Monthly, Percent per Year, Dec 2012 to Jan 2020
Fed Funds Rate | Yield of Thirty Year Constant Maturity | Conventional Mortgage Rate | |
2012-12 | 0.16 | 2.88 | 3.35 |
2013-01 | 0.14 | 3.08 | 3.41 |
2013-02 | 0.15 | 3.17 | 3.53 |
2013-03 | 0.14 | 3.16 | 3.57 |
2013-04 | 0.15 | 2.93 | 3.45 |
2013-05 | 0.11 | 3.11 | 3.54 |
2013-06 | 0.09 | 3.4 | 4.07 |
2013-07 | 0.09 | 3.61 | 4.37 |
2013-08 | 0.08 | 3.76 | 4.46 |
2013-09 | 0.08 | 3.79 | 4.49 |
2013-10 | 0.09 | 3.68 | 4.19 |
2013-11 | 0.08 | 3.8 | 4.26 |
2013-12 | 0.09 | 3.89 | 4.46 |
2014-01 | 0.07 | 3.77 | 4.43 |
2014-02 | 0.07 | 3.66 | 4.3 |
2014-03 | 0.08 | 3.62 | 4.34 |
2014-04 | 0.09 | 3.52 | 4.34 |
2014-05 | 0.09 | 3.39 | 4.19 |
2014-06 | 0.1 | 3.42 | 4.16 |
2014-07 | 0.09 | 3.33 | 4.13 |
2014-08 | 0.09 | 3.2 | 4.12 |
2014-09 | 0.09 | 3.26 | 4.16 |
2014-10 | 0.09 | 3.04 | 4.04 |
2014-11 | 0.09 | 3.04 | 4 |
2014-12 | 0.12 | 2.83 | 3.86 |
2015-01 | 0.11 | 2.46 | 3.67 |
2015-02 | 0.11 | 2.57 | 3.71 |
2015-03 | 0.11 | 2.63 | 3.77 |
2015-04 | 0.12 | 2.59 | 3.67 |
2015-05 | 0.12 | 2.96 | 3.84 |
2015-06 | 0.13 | 3.11 | 3.98 |
2015-07 | 0.13 | 3.07 | 4.05 |
2015-08 | 0.14 | 2.86 | 3.91 |
2015-09 | 0.14 | 2.95 | 3.89 |
2015-10 | 0.12 | 2.89 | 3.8 |
2015-11 | 0.12 | 3.03 | 3.94 |
2015-12 | 0.24 | 2.97 | 3.96 |
2016-01 | 0.34 | 2.86 | 3.87 |
2016-02 | 0.38 | 2.62 | 3.66 |
2016-03 | 0.36 | 2.68 | 3.69 |
2016-04 | 0.37 | 2.62 | 3.61 |
2016-05 | 0.37 | 2.63 | 3.6 |
2016-06 | 0.38 | 2.45 | 3.57 |
2016-07 | 0.39 | 2.23 | 3.44 |
2016-08 | 0.4 | 2.26 | 3.44 |
2016-09 | 0.4 | 2.35 | 3.46 |
2016-10 | 0.4 | 2.5 | 3.47 |
2016-11 | 0.41 | 2.86 | 3.77 |
2016-12 | 0.54 | 3.11 | 4.2 |
2017-01 | 0.65 | 3.02 | 4.15 |
2017-02 | 0.66 | 3.03 | 4.17 |
2017-03 | 0.79 | 3.08 | 4.2 |
2017-04 | 0.9 | 2.94 | 4.05 |
2017-05 | 0.91 | 2.96 | 4.01 |
2017-06 | 1.04 | 2.8 | 3.9 |
2017-07 | 1.15 | 2.88 | 3.97 |
2017-08 | 1.16 | 2.8 | 3.88 |
2017-09 | 1.15 | 2.78 | 3.81 |
2017-10 | 1.15 | 2.88 | 3.9 |
2017-11 | 1.16 | 2.8 | 3.92 |
2017-12 | 1.3 | 2.77 | 3.95 |
2018-01 | 1.41 | 2.88 | 4.03 |
2018-02 | 1.42 | 3.13 | 4.33 |
2018-03 | 1.51 | 3.09 | 4.44 |
2018-04 | 1.69 | 3.07 | 4.47 |
2018-05 | 1.7 | 3.13 | 4.59 |
2018-06 | 1.82 | 3.05 | 4.57 |
2018-07 | 1.91 | 3.01 | 4.53 |
2018-08 | 1.91 | 3.04 | 4.55 |
2018-09 | 1.95 | 3.15 | 4.63 |
2018-10 | 2.19 | 3.34 | 4.83 |
2018-11 | 2.2 | 3.36 | 4.87 |
2018-12 | 2.27 | 3.10 | 4.64 |
2019-01 | 2.40 | 3.04 | 4.46 |
2019-02 | 2.40 | 3.02 | 4.37 |
2019-03 | 2.41 | 2.98 | 4.27 |
2019-04 | 2.42 | 2.94 | 4.14 |
2019-05 | 2.39 | 2.82 | 4.07 |
2019-06 | 2.38 | 2.57 | 3.80 |
2019-07 | 2.40 | 2.57 | 3.77 |
2019-08 | 2.13 | 2.12 | 3.62 |
2019-09 | 2.04 | 2.16 | 3.61 |
2019-10 | 1.83 | 2.19 | 3.69 |
2019-11 | 1.55 | 2.28 | 3.70 |
2019-12 | 1.55 | 2.30 | 3.72 |
2020-01 | 1.55 | 2.22 | 3.62 |
2020-02 | 1.58 | 1.97 | 3.47 |
2020-03 | 0.65 | 1.46 | 3.45 |
2020-04 | 0.05 | 1.27 | 3.31 |
2020-05 | 0.05 | 1.38 | 3.23 |
2020-06 | 0.08 | 1.49 | 3.16 |
2020-07 | 0.09 | 1.31 | 3.02 |
2020-08 | 0.10 | 1.36 | 2.94 |
2020-09 | 0.09 | 1.42 | 2.89 |
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/H15/default.htm
http://www.freddiemac.com/pmms/pmms30.html
There is a false impression of the existence of a monetary policy “science,” measurements and forecasting with which to steer the economy into “prosperity without inflation.” Market participants are remembering the Great Bond Crash of 1994 shown in Table VI-7G when monetary policy pursued nonexistent inflation, causing trillions of dollars of losses in fixed income worldwide while increasing the fed funds rate from 3 percent in Jan 1994 to 6 percent in Dec. The exercise in Table VI-7G shows a drop of the price of the 30-year bond by 18.1 percent and of the 10-year bond by 14.1 percent. CPI inflation remained almost the same and there is no valid counterfactual that inflation would have been higher without monetary policy tightening because of the long lag in effect of monetary policy on inflation (see Culbertson 1960, 1961, Friedman 1961, Batini and Nelson 2002, Romer and Romer 2004). The pursuit of nonexistent deflation during the past ten years has resulted in the largest monetary policy accommodation in history that created the 2007 financial market crash and global recession and is currently preventing smoother recovery while creating another financial crash in the future. The issue is not whether there should be a central bank and monetary policy but rather whether policy accommodation in doses from zero interest rates to trillions of dollars in the fed balance sheet endangers economic stability.
Table VI-7G, Fed Funds Rates, Thirty and Ten-Year Treasury Yields and Prices, 30-Year Mortgage Rates and 12-month CPI Inflation 1994
1994 | FF | 30Y | 30P | 10Y | 10P | MOR | CPI |
Jan | 3.00 | 6.29 | 100 | 5.75 | 100 | 7.06 | 2.52 |
Feb | 3.25 | 6.49 | 97.37 | 5.97 | 98.36 | 7.15 | 2.51 |
Mar | 3.50 | 6.91 | 92.19 | 6.48 | 94.69 | 7.68 | 2.51 |
Apr | 3.75 | 7.27 | 88.10 | 6.97 | 91.32 | 8.32 | 2.36 |
May | 4.25 | 7.41 | 86.59 | 7.18 | 88.93 | 8.60 | 2.29 |
Jun | 4.25 | 7.40 | 86.69 | 7.10 | 90.45 | 8.40 | 2.49 |
Jul | 4.25 | 7.58 | 84.81 | 7.30 | 89.14 | 8.61 | 2.77 |
Aug | 4.75 | 7.49 | 85.74 | 7.24 | 89.53 | 8.51 | 2.69 |
Sep | 4.75 | 7.71 | 83.49 | 7.46 | 88.10 | 8.64 | 2.96 |
Oct | 4.75 | 7.94 | 81.23 | 7.74 | 86.33 | 8.93 | 2.61 |
Nov | 5.50 | 8.08 | 79.90 | 7.96 | 84.96 | 9.17 | 2.67 |
Dec | 6.00 | 7.87 | 81.91 | 7.81 | 85.89 | 9.20 | 2.67 |
Notes: FF: fed funds rate; 30Y: yield of 30-year Treasury; 30P: price of 30-year Treasury assuming coupon equal to 6.29 percent and maturity in exactly 30 years; 10Y: yield of 10-year Treasury; 10P: price of 10-year Treasury assuming coupon equal to 5.75 percent and maturity in exactly 10 years; MOR: 30-year mortgage; CPI: percent change of CPI in 12 months
Sources: yields and mortgage rates http://www.federalreserve.gov/releases/h15/data.htm CPI ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.t
Chart VI-14 provides the overnight fed funds rate, the yield of the 10-year Treasury constant maturity bond, the yield of the 30-year constant maturity bond and the conventional mortgage rate from Jan 1991 to Dec 1996. In Jan 1991, the fed funds rate was 6.91 percent, the 10-year Treasury yield 8.09 percent, the 30-year Treasury yield 8.27 percent and the conventional mortgage rate 9.64 percent. Before monetary policy tightening in Oct 1993, the rates and yields were 2.99 percent for the fed funds, 5.33 percent for the 10-year Treasury, 5.94 for the 30-year Treasury and 6.83 percent for the conventional mortgage rate. After tightening in Nov 1994, the rates and yields were 5.29 percent for the fed funds rate, 7.96 percent for the 10-year Treasury, 8.08 percent for the 30-year Treasury and 9.17 percent for the conventional mortgage rate.
Chart VI-14, US, Overnight Fed Funds Rate, 10-Year Treasury Constant Maturity, 30-Year Treasury Constant Maturity and Conventional Mortgage Rate, Monthly, Jan 1991 to Dec 1996
Source: Board of Governors of the Federal Reserve System
http://www.federalreserve.gov/releases/h15/update/
Chart VI-15 of the Bureau of Labor Statistics provides the all items consumer price index from Jan 1991 to Dec 1996. There does not appear acceleration of consumer prices requiring aggressive tightening.
Chart VI-15, US, Consumer Price Index All Items, Jan 1991 to Dec 1996
Source: Bureau of Labor Statistics
https://www.bls.gov/cpi/data.htm
Chart IV-16 of the Bureau of Labor Statistics provides 12-month percentage changes of the all items consumer price index from Jan 1991 to Dec 1996. Inflation collapsed during the recession from Jul 1990 (III) and Mar 1991 (I) and the end of the Kuwait War on Feb 25, 1991 that stabilized world oil markets. CPI inflation remained almost the same and there is no valid counterfactual that inflation would have been higher without monetary policy tightening because of the long lag in effect of monetary policy on inflation (see Culbertson 1960, 1961, Friedman 1961, Batini and Nelson 2002, Romer and Romer 2004). Policy tightening had adverse collateral effects in the form of emerging market crises in Mexico and Argentina and fixed income markets worldwide.
Chart VI-16, US, Consumer Price Index All Items, Twelve-Month Percentage Change, Jan 1991 to Dec 1996
Source: Bureau of Labor Statistics
https://www.bls.gov/cpi/data.htm
© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
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