What I will share are some of the output from a simple model for US 10-year Treasury bond yields.
1/n
I am working on a paper on why interest rates and yields are as low as they are. I will share some preliminary results here.
What I will share are some of the output from a simple model for US 10-year Treasury bond yields.
It is key to me that the model not only is statistically significantly, but is also economically significant. We need to understand economic developments within economic theory.
I have estimated a model for the US 10-year bond yield based on the following fundamental variables.
This of course captures the standard textbook relationship from growth theory (the Solow model) in which there is a positive relationship between real interest rates and real GDP as well as the Fischer equation where nominal interest rates are positive related to inflation.
Population growth (and demographics in general) should be expected to impact yields through numerous channels.
I would particularly highlight the impact on growth, risk appetite and savings. Overall we should expect higher population growth to increase yields.
This reflects the compensation investors would demand for lack of credibility of monetary policy.
This is measure of the slack in the US economy and should overall capture the US business cycle.
Futuremore, I have been playing around with different meausre of debt and leverage in the US economy - both private and public debt. None of these variables however, seem to have a statistically significant impact on US yields and rates.
The reason for this might be that these factors are correlated with growth, inflation and demographics.
The graph below shows 10-years US yields and the predicted model.
We see the model has quite a good fit over the past nearly 60 years.
We also see that there are some well-known different periods - for example the Great Inflation of the 1970s when yields reached historically high levels and the present period where yields are very low.
I have looked at the following four periods:
The Great Inflation (1967-82)
Disinflation (1982-1992)
The Great Moderation (1992-2008)
The Great Stagnation (2008-today)
The table below shows the decomposition of the contribution (basis points) to yields from the different factors in the models (note we split NGDP between RGDP growth and inflation).
The decomposition is done RELATIVE to the average impact on yields during the period from 1962 and until today.
Lowflation (1962-67)
During this period yields and rate where low relative to the historical average for the whole estimation period.
We that during the Lowflation period inflation was as was inflation variance. Hence, we had a period of nominal stability as well as some slack in the US economy with higher population growth than employment growth.
...
Higher RGDP/cap growth and pop. growth on the other hand were contributing to higher yields during the lowflation period but the other factors where stronger resulting in overall low yields in this period.
The Great Inflation started around 1967 and ended around 1982.
During this period US-yields and rates rose to historically high levels and the main driver was significant monetary instability with rising and volatile US inflation.
It is notable that during this period not only higher inflation pushed up yields, but equally inflation variance contributed to a similar degree to higher yields. We here see that the lose of monetary policy credibility is very costly.
In 1979 Paul Volcker became Federal Reserve chairman and the following year initiated an effort to reestablish monetary policy credibility and to push down inflation.
However, we here date the disinflation period from 1982 and until 1992.
The Fed's efforts paid off and inflation dropped markedly during this period relative to the Great Inflation period.
However, it is notable that bond yields did not immediately drop to reflect 1-to-1 and inflation variance - measured as 10-year moving variance in quarter/quarter changes in the GDP deflation remained high.
One can of course discuss this measure, but it seems to pretty well capture the fact that it took time to gain credibility about the Fed's renewed commitment to low inflation .
Hence, we see that this lack of credibility measured as inflation variance kept 10-year yields nearly 250bp higher than it would have been if the Fed had had the kind of credibility it had during the 1960s or after 1992.
More from For later read
The common understanding of propaganda is that it is intended to brainwash the masses. Supposedly, people get exposed to the same message repeatedly and over time come to believe in whatever nonsense authoritarians want them to believe /1
And yet authoritarians often broadcast silly, unpersuasive propaganda.
Political scientist Haifeng Huang writes that the purpose of propaganda is not to brainwash people, but to instill fear in them /2
When people are bombarded with propaganda everywhere they look, they are reminded of the strength of the regime.
The vast amount of resources authoritarians spend to display their message in every corner of the public square is a costly demonstration of their power /3
In fact, the overt silliness of authoritarian propaganda is part of the point. Propaganda is designed to be silly so that people can instantly recognize it when they see it
Propaganda is intended to instill fear in people, not brainwash them.
The message is: You might not believe in pro-regime values or attitudes. But we will make sure you are too frightened to do anything about it.
And yet authoritarians often broadcast silly, unpersuasive propaganda.
Political scientist Haifeng Huang writes that the purpose of propaganda is not to brainwash people, but to instill fear in them /2
"propaganda is often not used for indoctrination, but rather to signal the government\u2019s strength in being able to afford significant resources and impose on its citizens...not meant to 'brainwash', but rather to forewarn the society about how strong it is" https://t.co/mFAurhEHeO pic.twitter.com/WXKKJaPqWQ
— Rob Henderson (@robkhenderson) June 18, 2020
When people are bombarded with propaganda everywhere they look, they are reminded of the strength of the regime.
The vast amount of resources authoritarians spend to display their message in every corner of the public square is a costly demonstration of their power /3
In fact, the overt silliness of authoritarian propaganda is part of the point. Propaganda is designed to be silly so that people can instantly recognize it when they see it
Authoritarians do not use propaganda for brainwashing, "but to demonstrate their strength in social control...propaganda may need to be dull and unpersuasive, to make sure citizens know it is propaganda when they see it and hence get the implicit message" https://t.co/PqRpxjaIPL pic.twitter.com/1y67d2RCjB
— Rob Henderson (@robkhenderson) June 19, 2020
Propaganda is intended to instill fear in people, not brainwash them.
The message is: You might not believe in pro-regime values or attitudes. But we will make sure you are too frightened to do anything about it.
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Speech Delay is most common in children nowadays
In ancient times, our grandparents used to follow typical natural way of caring the needs of a child. All they used were more of natural products than chemical based for the growth of child.
One of major step followed was to feed Gurbach Jadd/ Vasa Kommu/ Acorus Calamus for initiating good speech ability in a child. This stem was needed to babies on Tuesdays and Sundays in mother's milk.
Vasa is feed to baby after the 1st bath on 12th day in week. Weekly only thrice it is fed and named as :
Budhwar - Budhi Vasa
Mangalwar - Vaak Vasa
Ravi Vaar - Aayush Vasa
This stem is burnt and rubbed against the grinding stone in mother's milk or warm water to get a paste
The procedure to make it is in the link
https://t.co/uo4sGp7mUm
It should not be given daily to the child. Other main benefits are
1. It clears the phlegm in child's throat caused due to continuous milk intake. It clears the tracts and breathing is effortless.
2. Digestion
For children who haven't got their speech and is delayed than usual should feed this vasa on these days in week atleast for 6months. Don't get carried away with this dialogue
"Some gain speech little late"
In ancient times, our grandparents used to follow typical natural way of caring the needs of a child. All they used were more of natural products than chemical based for the growth of child.
One of major step followed was to feed Gurbach Jadd/ Vasa Kommu/ Acorus Calamus for initiating good speech ability in a child. This stem was needed to babies on Tuesdays and Sundays in mother's milk.
Vasa is feed to baby after the 1st bath on 12th day in week. Weekly only thrice it is fed and named as :
Budhwar - Budhi Vasa
Mangalwar - Vaak Vasa
Ravi Vaar - Aayush Vasa
This stem is burnt and rubbed against the grinding stone in mother's milk or warm water to get a paste
The procedure to make it is in the link
https://t.co/uo4sGp7mUm
It should not be given daily to the child. Other main benefits are
1. It clears the phlegm in child's throat caused due to continuous milk intake. It clears the tracts and breathing is effortless.
2. Digestion
For children who haven't got their speech and is delayed than usual should feed this vasa on these days in week atleast for 6months. Don't get carried away with this dialogue
"Some gain speech little late"
