In the international fixed-income markets, interest rates are rising, and the decades-long trend of declining bond yields has undoubtedly been broken. On August 2, 2022, the ten-year United States Treasury yield was 0.5 percent; on October 9, 2023, it had risen to 4.8 percent. Long-term interest rates in Europe, Asia, and Latin America have also
Sovereign debt is eating the world. Lining up a financial crash that could make 2008 look like a picnic. How did we get here? In short, governments and central banks deluded themselves into thinking that unlimited deficit spending financed by unlimited money printing won’t do what they’ve done for literally millennia -- plunge the economy into
In May this year, the Congressional Budget Office estimated outstanding US government debt next October to be $27,388 billion. By the end of the first quarter of the fiscal year, it will exceed $34,000 billion. It is soaring out of control, and perhaps it is not surprising that the CBO has not updated its forecasts with this debt uncertainty. The
According to modern portfolio theory (MPT), financial asset prices always fully reflect all available and relevant information, and any adjustment to new information is virtually instantaneous. Thus, asset prices respond only to the unexpected part of information since the expected portion is already embedded in prices. For example, if the central
The thirty-year mortgage, of all things, came under attack in a piece by Ben Casselman in the New York Times . The three-decade fixed rate loan is, of course, a creation of the government and adds constant fuel to the US housing market. The title of Casselman’s piece calls the most popular debt instrument for home purchases “weird,” “cushy,” and
Many people believe that a general increase in stock prices is an important factor in economic growth. However, this is a questionable observation. The view that the stock market drives economic growth originates from the observation that changes in stock prices precede changes in economic data. We suggest that various economic indicators are
Our vacation airline tickets in September were funded by accumulated miles on our Alaska Airlines credit card. While on vacation this summer, my brother-in-law graciously hosted eight of us for dinner. He tried to downplay the generous hospitality by saying he had just gotten his “cash back” award from his credit card company. The “cash back”
Argentina maintains a high country risk. In fact, it is currently the second highest in Latin America and the third of the emerging countries if we include Turkey. What is the country risk? It is the spread between the yield of the sovereign bond of a nation compared with the United States Treasury bonds, the lowest risk asset. Investors demand
The issuance of debt is normally subject to a contract that it will be repaid at the end of its term, along with the coupon interest. The exception is undated bonds, when only the interest contract must be fulfilled. In practice, governments and many corporations roll over debt into new bond obligations at the end of their terms, but at least
After years of uncertainty following the country’s 2009 crisis, Greece’s corrupt government was replaced in January 2015 by a far-left government, elected because it promised the voters it would reject onerous bailout terms from Brussels. But it turned out that as far as the ECB and Brussels were concerned, Greece’s problems were to stay in
What is the Mises Institute?
The Mises Institute is a non-profit organization that exists to promote teaching and research in the Austrian School of economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard.
Non-political, non-partisan, and non-PC, we advocate a radical shift in the intellectual climate, away from statism and toward a private property order. We believe that our foundational ideas are of permanent value, and oppose all efforts at compromise, sellout, and amalgamation of these ideas with fashionable political, cultural, and social doctrines inimical to their spirit.