- in February of 1981, the risk free rate of return, 5 year treasuries, was 15%. Real rates were close to 5%.
- If the Fed was using an average of Volcker and Greenspan’s response to data as implied by standard Taylor rules, Fed Funds would be close to 3% today.
- despite the US global outperformance, we currently have the most negative real rates in the G-7.
- And smoothing growth over a cycle should not be confused with consistently attempting to borrow consumption from the future.
- As valuations rose since then, R&D and office equipment grew by only $250b, but financial engineering grew $750b, or 3x this! You can only live on your seed corn so long.
- unlike the pre-stimulus period, when it took $1.50 to generate a $1.00 of GDP, it now takes $7
- Some regard it as a metal, we regard it as a currency and it remains our largest currency allocation.
Druckenmiller: Bankers should be just making loans only.