What Should Be On The Agenda In Chicago?

The BLS might be instructed to keep two GDP series when there is a major definitional change (such as adding software to investment), to allow an internally consistent series for bond indexing. That’s a bit messy, but these major definitional changes don’t occur very often. Don’t let the perfect be the enemy of the good.

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Gary Anderson 8 months ago Contributor's comment

The concept of bonds tied to GDP growth is an interesting concept. But clearly long bonds are not reflecting growth in our economy at all. They reflect demand for bonds as money, bonds as collateral. Would bonds that grew in yield like the way bonds used to behave have much appeal? Clearinghouses mark to market the bonds as collateral. If yields rose, price would go down. Yes they could hold to maturity and get par but clearinghouses only care about market value at any given moment. Margin calls would certainly be required if those bonds were used as collateral and the economy grew.