Personal Finance & Money Asked on March 15, 2021
Pretty straightforward question, with, I imagine, very complex answers. I know the yield curve basically impacts the entire financial system, but I am looking to understand its macro-effects. Here are some postulations that I have surmised… please let me know if they are right/wrong, and what other implications I have missed:
What is the end goal here? Will the Fed allow the 10 year note to continuously increase so that it can continue to spend its way out of the economic recession, while simultaneously , somewhat, manage the growing debt? Will they, at some point, need to implement yield curve control to get the far end of the curve under control? Do stocks continue to suffer until this point?
Also, is it correct to view this as an endless march towards fiat devaluation? The DXY has been steadily decreasing over the past year and is at its lowest point in 3 years, and there doesn’t seem to be an end in sight.
There are too many assumptions in your question. For one thing, you assume that a steep yield curve is the cause of several issues, rather than just being an effect of a broader phenomenon. E.g. a steep yield curve and inflation could both be effects of an optimistic market climate. A flat yield curve and disinflation could be the effects of a pessimistic market climate.
Answered by Orange Coast- reinstate Monica on March 15, 2021
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