This could be good advice.

But, now there is more collateral in the form of long treasury bonds to protect.

They are afraid of their own shadows and inflation even though there is deflation all around us. Except for assets.

Interesting article. Trump makes consumers happy. Interesting that Trump days the economy is fragile. I thought the tax cuts were for strengthening the economy, but apparently not. This is why Trump will settle with China without a win.

Great article. Will Rogers said banks must be broke if they cannot handle a 1 percent increase. Now they, and the markets, cannot handle a quarter increase and balance sheet roll off. Definitely a concern.

Tyrants use the term enemy of the people to describe the press. Trump is a wanna be tyrant. That is his reality. He is constrained, but for how long?

Interesting article. Not sure how consumers flooding to Walmart from department stores shows that those consumers are in good shape, though.

Hi Prof,

Yes, I wrote about the Liberty Street issue with a link to their work. I called them the Liberty Fed boys and referred to an article from the Liberty Street blog. Again, whether they get it right, with the numbers, they know something is acting upon long bonds that has nothing to do with the bigger economic picture. Let me know what you think. I hope it stirs some interest in the community of economists: talkmarkets.com/.../bond-vigilantes-liberty-street-fed-collateral-study-and-art-cashin

Neutral is just another word for recession. Especially going past the neutral rate. Workers benefit from being below or at the neutral rate. But it fluctuates, right Prof? So, how does one know where they are? It sounds like the Bank of Canada is going to eventually take down the housing bubble unless it loses its will to do so. And what happens if the low long bond yields have nothing to do with the growth of the economy but are an effect of massive usage of bonds as collateral? I wish economists would start measuring this. Liberty Street has done some of this work in revealing this conundrum.

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.