The decline in long term rates is a function of deflation and the elimination of the term premium. Both are a reflection of falling velocity. Velocity is driving yields down.

Worse yet it's all being plugged with debt. Nobody seems to want to raise equity to ward off insolvency because it will mean a watering down of share values. The system is becoming totally corrupted by the obsession with share values.

I had to pour a large scotch after wrote it.

Thanks, Gary. The workings are much more specific as to target rates.The BoJ are clear that the 10yr be zero-- the fear is that it would go negative in the absence of their intervention. I see it as a one-way street, i.e. preventing yields from going negative. In WWII it was a case of preventing yields from going higher. Inflation is not the enemy, but deflation is. We should only be lucky to have a positively sloped curve and some inflation as an indication that growth is taking hold.

I agree with you that we need helicopter money. The Fed should credit the banks with as much money that is needed to prompt spending. Right now, it is just filling a hole as monthly debts come due --not promoting growth.

Thanks

I am not sure it's going to work because the problem is so vast and we do not really understand the full ramifications.

I agree that we should seriously consider helicopter money. This has always been the last resort deflationary world and it appears that we are heading in that direction.

Your point about the scale in China overwhelms that of the United States is so important. The Trump administration does not appreciate just how powerful the middle class is in China and how much this virus will hurt Chinese purchases from United States for both goods and services.

Kudlow statement is a total contradiction in terms. I never had much respect for his his understanding of economics. If the economy were so strong then why is there a flight to safety? Strong economies have upper sloping yield curves.

The Canadian bond market is taking its cue from the US bond market which is also inverted. At the same time oil and other commodity prices are weak. Manufacturing has been declining for nearly six months straight. And Canada now feels a chill from China and its impact upon worldwide supply chains. The Canadian stock market hit an all-time high earlier in the week so we can't say there's any flight to quality

Simply bond investors have a completely different outlook on the future compared to stock market investors.

Gary, I agree. The issue is that there is no American telecom that is at the forefront of the 5G technology. The US dropped the ball awhile ago and assumed that 5G was a longer way off in the future. Meanwhile, Chinese and European developers marched ahead.( I am biased. I have a Huawai phone and find it better and much cheaper than iPhones. Do I think the Chinese are spying on me??)

Gary you are correct.Israel's tech sector is deeply involved with China,especially in AI.

As for Flat Broke the US has a long history of not acting in its best intersts. By starting a trade war which the US does not know how to end is a perfect example of not acting and your own best interest.