I have a question regarding the table of US treasury debt.
I can see that the long end shows very low rates. What does that mean? Is this because people are locking up 30 year bonds because they expect 3 decades of deflation, or is this because what little 30 years are selling in a “flight to safety” is driving down their yields, or because the Fed is buying them?
Please teach me, but I was under the impression that sales of long bonds have fallen off a cliff and most investors are on the very short end due to the clear uncertainty of what rates will go to in the future?
I see the table but I don’t know how to analze the data. If the volume of 30 year bonds is huge, I would expect that to mean people are locking up their money at 4% because they think 30 years out that will be a good rate. If people are buying huge volumes of 2 year notes and shunning the 30 year, that tells me that people know rates will leap up and don’t want to lock up their money for any length of time.
Do you know which is happening?
I can’t exppain everything you ask in a short note. I’m swamped this week and into next week. I’m not ducking you question, I just know how much I had to read to understand these issues.
So please ping me late next week and I will get back to you on this.
There is some reading which is useful to spot commonality in debt deflations: Kindleberger’s “Manias, Panics and Crashes” is a good history of major financial blow-ups and some of the aftermath. While history never repeats exactly, it does rhyme quite a bit.
Next is to read Fisher’s paper on debt deflations! Available on the St. Louis Fed Reserve web site. Just google “Fisher deb deflation” and you’ll find it.
The google around for Hyman Minsky’s work on debt economies.
All of this stuff helps paint the background on debt deflations and what happens as a result.
The last thing I will point you to is the Fed’s “FRED” database of economic data. Google “federal reserve fred” and you get it pronto. Just start reading the charts and explanations of same. This will take you a week easily. But pay special attention to bank reserve information and credit formation data.
Last, consider this: When Japan’s melt down started, they were a creditor nation, with about 30% debt:GDP ratio. Now they’re at 230% debt:GDP. Interest rates are still rock-bottom low, they’re resorting to deliberately devaluing rhe yen to maonyain their exports and they’re going on 20 years of slow to no growth.
The common school of thought would have us believe that the level of spending by Japan’s government would have spurred inflation. Many economists STILL believe this, and they keep telling Japan and the BOJ to throw more money into a non-functional policy.