[Dems2008] Treasury yields and stock indices

To illustrate the point, here's a chart comparing the 10-year Treasury note YIELD (which of course moves inversely to the price of the note) compared with the S&P 500.

The yield on the note has fallen as stock indices have fallen.  The fall in the yield is a function largely of two factors:  (i) a view that economic activity is declining and (ii) a flight to safety out of stocks and into Treasurys.

http://tinyurl.com/33hgwx

Our larger problem longer term is the U.S. dollar, and the fact that long=term lenders will, over the long term, insist on higher interest rates if they believe (or perceive) that they will be repaid in depreciated dollars.   And the Fed follows the capital markets (it does not CONTROL interest rates, only the Fed Funds rate and the discount rate); it does not lead them.

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