Long Bond Yields vs The Long Wave
Different bloggers have been posting their favorite charts of 2019 this January. So I decided to post my favorite chart of the past 20, or more, “years of the long bond yield versus the long run trend.” Bond yields are now below their long run trend and may be at or near a secular bottom. Of course no one rings a bell at the turning point so we probably will only identify the bottom long after it actually occurs.
The long wave chart is striking; but there is no ontological reality there. People living through the time period recall steadily building inflation and inflation expectations, initially from post-war expansion, and culminating in accelerating inflation from the “guns and butter” policy of the Vietnam war. Then the Fed’s savage tamping down of inflation was followed by continued disinflation from aging population and from dearth of investment from government policies that redistribute wealth upwards, and encourage monopolistic rent-seeking. For predictive power, seek it in politics.
Redistribution of wealth is not meaningful. Because no actual wealth has been created since June of 2000. It’s all debt and debt expansion. Let it die, let it cry.