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> But it was Jimmy Carter who appointed Volcker as the Fed chair, in 1979. Volcker was appointed specifically to do this job, as he was known as an inflation ha

> But it was Jimmy Carter who appointed Volcker as the Fed chair, in 1979. Volcker was appointed specifically to do this job, as he was known as an inflation hawk, and Carter recognized inflation as America’s biggest economic problem. Volcer hiked interest rates all the way up to 17.61% under Carter, causing the first of the two Volcker Recessions in 1980. The process that Volker's Fed set in motion is with us today. Have a gander at the historical constant-maturity 30-year bond: https://fred.stlouisfed.org/series/DGS30 https://fred.stlouisfed.org/series/DGS30 Zoom out to the multi-decade view and notice something: a peak in late-1981 and a relentless slide toward zero today. You won't find a multi-decade channel like this in many other places. These ever-lower long-term yields have played a major role in the housing market bubble that ended in 2008 and the one still inflating today. It could also be argued that this trend toward ever-lower long-term yields has been responsible the increasingly outlandish stock market valuations and the never-ending quest for yield (i.e. risk) that we currently see by institutions, individuals, and foreign governments.

bregma 5y ago
I have no need to look at historical graphs. I remember my student loans at a 25% per annum interest rate.
jollybean 5y ago
" You won't find a multi-decade channel like this in many other places." I see this graph in a number of places, I think it's something 'talked about'. The issue, I believe, is fundamentally demographics combined with decreasing marginal returns to tech and progress. 1970's was when the baby boomers were entering the workplace, and there were a lot of them, now, not so much. For decades after WW2 American industry was 'ahead' of the factories in Europe and Japan which were bombed into nothing. So there was a natural slowdown in growth afterwards. Then every loosening monetary policy with a big bump in 2008 and an even bigger bump in 2021 and you have what you have. "ever-lower long-term yields have played a major role in the housing market bubble that ended in 2008" I think it's better to say they are an indicator of something material, but 'lower bond yields' are not the 'driver of housing inflation'. That said, I agree with a lot of the things said in the article.

bregma 5y ago

I have no need to look at historical graphs. I remember my student loans at a 25% per annum interest rate.

jollybean 5y ago

" You won't find a multi-decade channel like this in many other places." I see this graph in a number of places, I think it's something 'talked about'. The issue, I believe, is fundamentally demographics combined with decreasing marginal returns to tech and progress. 1970's was when the baby boomers were entering the workplace, and there were a lot of them, now, not so much. For decades after WW2 American industry was 'ahead' of the factories in Europe and Japan which were bombed into nothing. So there was a natural slowdown in growth afterwards. Then every loosening monetary policy with a big bump in 2008 and an even bigger bump in 2021 and you have what you have. "ever-lower long-term yields have played a major role in the housing market bubble that ended in 2008" I think it's better to say they are an indicator of something material, but 'lower bond yields' are not the 'driver of housing inflation'. That said, I agree with a lot of the things said in the article.