The Economy Should Have a Real Yield: CNBS
The Market Ticker - Commentary on The Capital Markets
Logging in or registering will improve your experience here
Main Navigation
Display list of topics
Sarah's Resources You Should See
Sarah's Blog Buy Sarah's Pictures
Full-Text Search & Archives
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.


The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be sent unmodified to lawmakers via print or electronic means or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media, to republish full articles, or for any commercial use (which includes any site where advertising is displayed.)

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.

Considering sending spam? Read this first.

2018-10-12 07:00 by Karl Denninger
in Monetary , 119 references Ignore this thread
The Economy Should Have a Real Yield: CNBS
[Comments enabled]

So they said at 7:41 on 10/11.

Ok.  I happen to agree by the way because, as was noted in one of the first few pages of LeverageNobody, in a free market, ever lends money at a loss on purpose.

This doesn't mean people don't do dumb things; they do -- all the time.

But nobody holds a bonfire on their back porch with $100 bills.

So what is the nominal short-term (e.g. 13 week T-bill) rate of interest required today to have a positive real rate?

That's easy -- more than 6.23%.

That is the forward real rate must be greater than the federal budget deficit in nominal terms as a percentage of the economy or you are lending money intentionally at a loss.

Yet the entire bubble machine game since the 1990s has been predicated on intentionally lending at a loss, with the game being a simple one: How do you con people world-wide into buying Treasuries at a coupon rate that is less than the budget deficit of the Federal Government on an annual basis?

You can only do it by lying and outright coercion.

There is no other way because nobody will do it on purpose otherwise.

The stock market is overvalued by an enormous amount as a direct consequence of this because a "forward P/E" is inherently a declaration of leverage.

Go look at the top of The Market Ticker masthead.  Take said leverage out of the system and then account for the expected overshoot and that's about where it trades.

The entire so-called "recovery" since 2009 has been one fraud-laced leverage game.

These games always end and they always end in crashes because nobody -- and I do mean nobody -- ever comes out and actually puts forward the two basic facts: Nobody ever intentionally lends at a loss and The actual rate of monetary inflation is trivially measurable as the advance in Federal Debt against GDP.

Therefore in order for there to be a positive real rate of return on any such security the short-term, near-zero time rate for such lending must be higher than the rate of monetary inflation and for the entire time that it is not all advance in the price of financial assets is a bubble and fraudulent.

Go to responses (registration required to post)

User: Not logged on
Login Register Top Blog Top Blog Topics FAQ
User Info The Economy Should Have a Real Yield: CNBS in forum [Market-Ticker]
Posts: 1413
Incept: 2008-12-09

Spokane WA
Report This As A Bad Post Add To Your Ignored User List
The sad thing for me is that the entire batch of 'economic growth and expansion' during my entire working life has been a lie.

Road sign ahead: "Epic smoking hole in your immediate future."

Omne mendacium est.
Posts: 286
Incept: 2013-01-11

Western PA
Report This As A Bad Post Add To Your Ignored User List
KD, this is the most concise and easily comprehensible illustration of the low interest rate flim-flam game holding sway over the economy.
Login Register Top Blog Top Blog Topics FAQ