Konnichiwa 0.99%

As recently as the first four months of 2011 the yield on 5 year T-notes was well over 2%, as QE2 pushed up NGDP growth expectations.  Then the Fed gave up, and the world was hit by some bad luck.   Today the yield fell below 1%, indeed at one point it was just 0.86%.  That’s right, in just a few months the Fed has moved us 2/3rds of the way to Japanese levels of pessimism.



6 Responses to “Konnichiwa 0.99%”

  1. Gravatar of Mike Sandifer Mike Sandifer
    9. August 2011 at 23:55

    Here is a call from Jonathan Bernstein for liberals to pressure the Fed for more stimulus:


    Obviously, he was one of the architects of the fiscal stimulus and he’s criticizing Obama for having done little about monetary policy. It makes me wonder who Obama was listening to in the White House.

    This reminds me of Nixon ignoring Friedman and engaging in the worst economic policy we’d seen since the Great Depression and which hadn’t been exceeded since, until this administration.

  2. Gravatar of Mike Sandifer Mike Sandifer
    10. August 2011 at 00:33

    To continue uncharacteristically posting a lot of links here, CNBC covers market reactions to Fed statements yesterday.


    No matter how many times the market reactions strongly just after Fed statements, rising sharply on news of easing and falling fast on news of tightening, some continue to claim the Fed’s near zero rate policy is harmful or largely irrelevant to the health of the economy.

  3. Gravatar of Scott Sumner Scott Sumner
    10. August 2011 at 07:04

    Mike, Thanks for the links. But I’d caution that just because Bernstein is now calling for monetary stimulus, doesn’t mean he was doing so when liberals still thought fiscal stimulus might work.

  4. Gravatar of Contemplationist Contemplationist
    10. August 2011 at 07:53

    The cynical explanation of course is that it was a golden opportunity to permanently ramp up the baseline of Federal spending, so why let the opportunity go? Monetary stimulus would’ve created a recovery without any “cash for clunkers,” GM bailout, funds to the States, etc.

  5. Gravatar of Mike Sandifer Mike Sandifer
    10. August 2011 at 13:52


    Of course.

  6. Gravatar of Scott Sumner Scott Sumner
    11. August 2011 at 19:14

    Contemplationist, Maybe, but if so it might be an error that costs Obama the election.

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