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Obama Calls for 'Full-Scale Attack' to Revive Struggling Economy

I have a question goldenboy.

During the crisis the average maturity of US treasuries took a nose dive, and the average maturity has really been decreasing since about 2001. Only recently has it begun climbing again. What, if anything, does this change represent?

debt_maturity2_aug_10.gif


x -axis = year
y - axis = average maturity of debt held by the public (in weeks)

From looking at the graph, i am going to assume that the line represents all treasuries.

On the surface, a declining maturity is a sign of shrinking yields, which can be explained by an increase relative to proportion in short term debt issuance. This has occurred not only on the governmental front, but in private debt markets as well. The rise of money markets along with various SIVs (structured investment vehicles) undoubtedly played a role.

The change however shows (IMHO) that long term deflation (even extremely low inflation) is unlikely.
 
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You want a quick way to stimulate the economy, cut a bunch of $10k checks to the bottom 50% of income earners.
It will be circulated through the economy and it will be done fast.

$690,000,000,000 deeper in debt.

Edit: If you got lost in the 0's..... that is 690 trillion deeper in debt.
 
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that's nice, but meanwhile, here on earth, any further stimulus is non starter

Has Obama Run Out of Economic Options? - Newsweek

bernanke is stuck between a rock and a double dip

Ben Bernanke dashes Democrats' hopes - Ben White - POLITICO.com

conrad, nelson and lieberman are already on record---extend bush tax cuts to all

Tax cuts for rich, and middle class, gains steam - Aug. 27, 2010

last week the prez interrupted his golf swing to release the "readout" of his "conference call" with his "economic team," universally panned as "lame"

Readout of President Obama's Conference Call with His Economic Team | The White House

and then, yesterday, in that peculiar impromptu presser in the rose garden, over-his-head obama attempted to assure us---my "economic team is hard at work in identifying additional measures that could make a difference in both promoting growth and hiring in the short term"

ah, additional measures...

the economic team---hard at work

they'll be "providing details" in the "days and weeks to come"

"Can You Guys Still Hear Us?": President Obama Talks Economy Amidst Technical Snafus - Political Punch

well, isn't it gladdening to know they've made so much progress?

why did romer and orszag quit?
 
From looking at the graph, i am going to assume that the line represents all treasuries.

On the surface, a declining maturity is a sign of shrinking yields, which can be explained by an increase relative to proportion in short term debt issuance. This has occurred not only on the governmental front, but in private debt markets as well. The rise of money markets along with various SIVs (structured investment vehicles) undoubtedly played a role.

The change however shows (IMHO) that long term deflation (even extremely low inflation) is unlikely.

I just want to make sure I am thinking this through correctly. Shrinking yields mean that the price of the treasuries are increasing, which either means less treasuries are being issued or a higher demand for treasuries. So if the fed gov issued less long term debt and more short term debt this would decrease the yields on long term debt and increase yields on short term debt (other things equal). This would create a "flatter" and lower yield curve since short term treasuries will typically yield less than long term treasuries.
 
Goldenboy I'm back, but reading over your comments it's truly, and not trying to be rude, you're one of the few people I can have a serious discussion on this topic with, blown away you're ok with this reckless monetary policy. I mean the delicate tight rope walk that has to happen for this strategy to work is mind blowing.

Do you have faith in the fed to actually pull this off?
 
Sounds like 'Ballroom Blitz' or something.... "full scale attack"... yeah, right. Hell he's already making a full scale attack on the economy. :lamo
 
from the obscurantist orifice of the inscrutable one himself:

“One risk of further balance sheet expansion arises from the fact that, lacking much experience with this option, we do not have very precise knowledge of the quantitative effect of changes in our holdings on financial conditions."

no duh

ben white:

Some Federal Reserve officials had hoped to reduce the bank’s balance and to focus on keeping inflation in check. But many economists now see deflation — an often self-perpetuating cycle of falling prices — as a greater threat. The Fed purchased $1.7 trillion in bonds during the financial crisis.

Ben Bernanke dashes Democrats' hopes - Ben White - POLITICO.com

meanwhile, outside the stuffy world of textbooks:

today: U.S. Auto Sales May Hit 28-Year Low as Discounts Flop - Bloomberg

new homes sales, all time low, august 25: http://www.newsday.com/classifieds/real-estate/pace-of-new-home-sales-slowest-on-record-1.2235595

existing homes, 15 year nadir, august 24: Low prices and rates can't slow fall in home sales - Yahoo! News

august 27: GDP report: Economic growth for second quarter slows to 1.6% - Aug. 27, 2010

today: Dow Logs Worst August in 9 Years - WSJ.com

educated americans need to take their noses outta those post grad primers and look around at reality, we know obama can't
 
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following it up with a firm governmental debt reduction plan and you have a home run.

http://thehill.com/homenews/house/104635-dems-wont-pass-budget: "dems won't pass budget in 2010"

perturbingly, the party in power is too pinched and too pusillanimous even to propose a blueprint for 2011

in other words, get real

unless this is all mere academic exercise

in which case, several contributers to this egghead thread earn ripping A+'s (and i mean that)

unfortunately, tho, mom's a realist, no wonk
 
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I just want to make sure I am thinking this through correctly. Shrinking yields mean that the price of the treasuries are increasing,

The price of treasuries are increasing, however the issuance of short term debt is increasing more so than face values (which are market determined for the most part).

which either means less treasuries are being issued or a higher demand for treasuries.

Not entirely. More treasuries are being issued in the face of greater demand (which illustrates the post 2008 retracement).

So if the fed gov issued less long term debt and more short term debt this would decrease the yields on long term debt and increase yields on short term debt (other things equal). This would create a "flatter" and lower yield curve since short term treasuries will typically yield less than long term treasuries.

It all depends on demand. Short term debt is in greater demand since 2000 partly because of a growing negative current account. Foreign trade partners (say China) have a greater demand for "two year" and less durations due to greater flexibility. Reason be, maturities are quicker which reduces the possibility of portfolio devaluation. Liquidating a slew of longer term debt would undoubtedly lower the face value in cases such as China or Japan (the latter is highly unlikely).

Inflation expectations are also quite low (which is critical in increasing demand for short term debt).
 
Roosevelt essentially spent our way out of the Great Depression. But this time, we have a problem - We don't have any money left to do this.

He did nothing of the sort. Rebuilding Europe after WWII transferred the wealth from Europe to the United States. FDR did nothing but prolong the recovery. You are right about the empty coffers, though.
 
He did nothing of the sort. Rebuilding Europe after WWII transferred the wealth from Europe to the United States. FDR did nothing but prolong the recovery. You are right about the empty coffers, though.
I was under the impression that WWII debts from MOST of Europe never got paid ....
 
He did nothing of the sort. Rebuilding Europe after WWII transferred the wealth from Europe to the United States. FDR did nothing but prolong the recovery. You are right about the empty coffers, though.

You could not put forth a compelling argument regarding the bold if you were paid to....
 
Either way - though drones (play on "full scale attack") or printing more money --- we **** out of luck here.

Time to shut down the government - send these clowns home and let the market fix this. Unless of course, we can just print more worthless money ...

Isn't the market and the corruption contained within it, what got us to this point in the first place?
 
Roosevelt essentially spent our way out of the Great Depression. But this time, we have a problem - We don't have any money left to do this.

In actual fact WW11 was the prime reason for the ending of the Great Depression.

With respect to the US being broke, I have been saying this for the last 6 years, to ears that remain stubbornly closed.
Government has never created wealth, that is something that is created by the ingenuity and industry of people.
If these people cannot see that they are going to be permitted to keep a fair share of the wealth they create, put quite simply, they will not create that wealth.
So Obama and his cabal are in a cleft stick, either they stick to their beliefs that Government controls wealth making as well as wealth distribution, or they all of a sudden turn 180 degrees and become pragmatic enough to allow business the free reins in needs to create not only wealth, but jobs to create that wealth.
 
The price of treasuries are increasing, however the issuance of short term debt is increasing more so than face values (which are market determined for the most part).



Not entirely. More treasuries are being issued in the face of greater demand (which illustrates the post 2008 retracement).



It all depends on demand. Short term debt is in greater demand since 2000 partly because of a growing negative current account. Foreign trade partners (say China) have a greater demand for "two year" and less durations due to greater flexibility. Reason be, maturities are quicker which reduces the possibility of portfolio devaluation. Liquidating a slew of longer term debt would undoubtedly lower the face value in cases such as China or Japan (the latter is highly unlikely).

Inflation expectations are also quite low (which is critical in increasing demand for short term debt).

I would expect that as the economy recovers (eventually) our current account will continue to become more negative (compared to during the recession). So this should mean a higher amount of US fincancial assets being sold overseas (more treasuries). So in this regard we should continue to see a growing demand for short term treasuries.

I am curious about what more short-term debt being demanded means for the government financing though. Does this make it harder for the US government to continue to "roll over" its debt onto the next year, since we consecutively have had deficits for 10 years now? I would think it would make it easier for the government to continue to borrow, however, a drop in demand for short term treasuries might trigger the government to have to use more long term debt to finance its activities.
 
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