Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Historically, it's been the case that steeper yield curves have led to greater economic growth (or should I say 'have indicated greater economic growth'?). However, with the Federal Reserve, by their own statements, keeping short term rates practically at zero for the foreseeable future, would such a relationship still hold? Or was that the basis of the relationship all along?
It's also by definition true that the real growth rate is dependent upon the measured inflation rate. To begin the New Year on a nicely conspiratorial note, if the coincidence of a steeper yield curve together with suppressed short term rates is the result of increased inflation (which leads to the increased long term rates) then a lowball measurement of the inflation rate would give us a falsely optimistic rate of economic growth, no? Not that any such thing would be to the advantage of Washington or Wall Street, of course.
Should anyone care about my opinion, I'd guess that the lowball measurement of inflation would come from hedonic adjustments which, besides being extraordinarily subjective by nature, always adjust inflation downwards for quality improvement and never adjust inflation upwards for quality deterioration, as well as the method for measuring 'owner's equivalent rent', which is downright ridiculous if I have it right (they survey homeowners, asking them what their homes would rent out for if they were to rent them out, as if someone not considering such rental would have an accurate assessment of such).
Of course, I'm just an amateur investor and if anything I've said is an 'urban myth' I hope someone will correct me.
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It's also by definition true that the real growth rate is dependent upon the measured inflation rate. To begin the New Year on a nicely conspiratorial note, if the coincidence of a steeper yield curve together with suppressed short term rates is the result of increased inflation (which leads to the increased long term rates) then a lowball measurement of the inflation rate would give us a falsely optimistic rate of economic growth, no? Not that any such thing would be to the advantage of Washington or Wall Street, of course.
Should anyone care about my opinion, I'd guess that the lowball measurement of inflation would come from hedonic adjustments which, besides being extraordinarily subjective by nature, always adjust inflation downwards for quality improvement and never adjust inflation upwards for quality deterioration, as well as the method for measuring 'owner's equivalent rent', which is downright ridiculous if I have it right (they survey homeowners, asking them what their homes would rent out for if they were to rent them out, as if someone not considering such rental would have an accurate assessment of such).
Of course, I'm just an amateur investor and if anything I've said is an 'urban myth' I hope someone will correct me.