Recently Yahoo News on-line reported the following:
The Price of Money Is Going Up, and It’s Not Only Because
of the Fed (2/2)
Jamie Rush, Martin Ademmer, Maeva Cousin and Tom Orlik
Mon, November 6, 2023 at 8:00 a.m. GMT+8
(continue)
All that is changing. Some of the forces that drove the
price of money lower are swinging into reverse. And other vectors are coming
into play.
Demographics are shifting. The baby boom generation that helped push borrowing costs down is exiting the workforce—resulting in a smaller supply of savings. Fracturing relations between Washington and Beijing, and a rebalancing of China’s economy, mean the flow of Chinese savings across the Pacific into Treasuries has come to an end.
US debt leaped as the global financial crisis ripped through the economy and again as the coronavirus pandemic struck. Those episodes increased competition for savings, and the government has kept the taps open with the Inflation Reduction Act. Rising debt is already creating upward pressure on long-term borrowing costs.
How much higher will the natural rate go? Our model shows a rise of about a percentage point from a trough of 1.7% in the mid-2010s to 2.7% by 2050. In nominal terms, that means 10-year Treasury yields could settle somewhere between 4.5% and 5%. And the risks are skewed toward even higher borrowing costs than our baseline suggests.
If the government doesn’t get its finances in order, fiscal deficits will stay wide. The fight against climate change will require massive investment. BloombergNEF estimates getting the energy network in shape to achieve net-zero carbon emissions will cost $30 trillion. And leaps forward in artificial intelligence and other technologies might yet boost productivity—resulting in faster trend growth.
High government borrowing, more spending to fight climate change, and faster growth would all drive the natural rate higher. According to our estimates, the combined impact would push the natural rate to 4%, translating to a nominal 10-year bond yield of about 6%.
Even in our baseline projection, the shift from a falling to a rising natural rate will have profound consequences for the US economy and financial system. Since the early 1980s, house prices in the US have roared higher, with the decline in interest rates a major contributing factor. With borrowing costs now set to edge higher, that process may come to an end. There’s a similar story in equity markets. Since the early ’80s, the S&P 500 has surged upward, powered in part by lower rates. With borrowing costs on the rise, that impetus for ever-increasing equity valuations will be taken away.
Of course, higher rates create winners as well as losers. Savers with their money in bank accounts will get higher returns, and those piling into bonds will get a better rate of return. And a higher natural rate would also mean that—when recessions hit—there will be a little more room in the yield curve for the Fed to squeeze borrowing costs and stimulate growth, restoring some of monetary policy’s lost firepower. After years of falling rates, though, the US—and the world—needs to brace for a reversal. For everyone from homeowners to 401(k) equity investors to the US Treasury, that’s going to be a wrenching transition.
The model we use to estimate the natural rate is a vector autoregressive model (VAR) with common trends. It’s similar in spirit to Del Negro et al. (2017) and Del Negro et al. (2019) and is estimated from 1Q 1968 to 4Q 2022 with spillovers between 12 advanced economies. Our model is underpinned by three main beliefs: that the natural rate is determined by fundamental economic drivers, that actual borrowing costs will eventually return to the natural rate over time, and that survey data contain useful information about where the natural rate may lie. The VAR model and the survey data are only used to sharpen our estimates of the relationships between the drivers and the natural rate. To project the natural rate forward, all we need is projections of the drivers—these forecasts are drawn from the wider Bloomberg Economics team. Much of the literature on the natural rate focuses on short-term interest rates. We focus on long-term rates because central banks have increasingly relied on lowering them to support the economy, and because the 10-year Treasury bond yield is a crucial benchmark in global markets.
Translation
（繼續）
一切都在改變。 一些推動貨幣價格下跌的力量正在逆轉。 其他可變力量也開始發揮作用。
人口結構正在改變。 幫助降低借貸成本的嬰兒潮世代正在退出勞動市場，導致儲蓄供應減少。 華盛頓和北京之間關係的破裂以及中國經濟的再平衡，意味著跨越太平洋流入美國國債的中國儲蓄情況已經結束。
隨著全球金融危機席捲經濟，美國債務激增，及隨著冠狀病毒大流行的爆發，美國債又務再次飆升。 這些事件加劇了爭儲蓄競爭，政府因《通貨膨脹削減法案》保持了開放。 債務上升已經給長期借貸成本帶來了上行壓力。
自然利率會高出多少？ 我們的模型顯示，到2050 年，這增長率是約1.0%, 從2010 年代中期1.7% 的低谷上升到2.7% 左右。表面上，這意味著10 年期債卷的利率可能穩定在4.5% 至5%之間。 而且風險是偏向比我們的基準顯示的更高的借貸成本。
如果政府不把財政整頓，財政赤字將繼續擴大。 應對氣候變遷需要大量投資。 彭博新能源財經 估計，建立能源網路以實現淨零碳排放將花費 30 兆美元。 人工智慧和其他技術的飛躍可能會提高生產力，從而帶來更快的成長趨勢。
龐大的政府債務、應對氣候變化的更多支出, 以及更快的成長都將推高自然利率。 根據我們的估計，綜合影響將使自然利率升至 4%，相當於 10 年期債券名義上的利率約為
6%。
即使我們以基準線去預測，自然利率從下降到上升的轉變也將對美國經濟和金融體系產生深遠的影響。 自1980年代初以來，美國房價一路飆升，其中利率下降是主要推動因素。 隨著借貸成本現在逐漸上升，這個過程可能會結束。 股票市場也有類似的故事。 自 80 年代初以來，標準普爾 500 指數一路飆升，部分原因是利率下降。 隨著借貸成本上升，股票估值不斷上升的動力將被消除。
不過，也許最大的輸家將是美國財政部。 即使債務相對於經濟規模不再進一步增加，到
2030 年，較高的借貸成本也將導致債務支付每年增加
GDP 的
2%。如果去年是這種情況，財政部將要額外支付 5,500 億美元美元給債券持有人, 這是美國迄今向烏克蘭提供的安全援助金額的十倍以上。
當然，較高的利率會產生贏家，也會產生輸家。 將錢存入銀行帳戶的儲戶將獲得更高的回報，而將資金投入債券的人仕將獲得更高的回報率。 更高的自然利率也意味著，當經濟衰退來襲時，聯儲局在收益率曲線上將有更多的空間來壓縮借貸成本並刺激成長，從而恢復貨幣政策所失去的部分火力。 不過，經過多年的利率下降，美國乃至世界需要做好面對逆轉的準備。 對於從房屋主人到 401(k) 股權投資者再到美國財政部的每個人來說，這都將是一個痛苦的轉變。
我們用來估計自然率的模型是具有共同趨勢的向量自我迴歸模型（VAR）。 它在精神上與Del Negro等人（2017）和及Del Negro等人（2019）相似，估算時間為 1968 年第一季至 2022 年第四季度，涉及 12 個已開發經濟體之間的溢出效應。 我們的模型以三個主要信念為基礎：自然利率由基本經濟驅動因素決定，隨著時間的推移實際借貸成本最終將回歸自然利率，及調查數據藏有有關自然利率可能所在位置的有用資訊。 VAR 模型和調查數據僅用於加強我們對驅動因素與自然利率之間關係的估計。 為了預測自然利率，我們所需要的只是對驅動經濟的因素的預測 - 這些預測來自更廣泛的彭博經濟團隊。 許多有關自然利率的文獻都只關注短期利率。 我們關注長期利率是因為央行越來越依賴降低利率來支持經濟，而十年期美債券利率是全球市場的重要基準。
So,
the price of money—like the price of anything else—reflects the balance of
supply and demand. Higher supply of saving pushes rates down. More investment
demand pushes them up. The low interest period is now reversing. Bloomberg’s dataset shows that in the 1960s
and ’70s, a swelling workforce and rapid productivity gains meant average
annual growth of gross domestic product was close to 4%. Strong growth created
a powerful incentive to invest—lifting the price of money. By the 2000s those
drivers were running out of steam. After the global financial crisis of
2007-08, average annual GDP growth slumped to around 2%. A more sluggish
economy meant the attractiveness of investing for the future was
weaker—dragging the price of money lower. About the future, I am wondering how the
current high interest situation will affect the US that has a huge national
debt.
Note:
a. A yield curve (收益率曲線)is a
line that plots yields, or interest rates, of bonds that have equal credit
quality but differing maturity dates. The slope of the yield curve can predict
future interest rate changes and economic activity. There are three main yield
curve shapes: normal upward-sloping curve, inverted downward-sloping curve, and
flat. (https://www.investopedia.com/terms/y/yieldcurve.asp)
b. Vector autoregression (VAR) (向量自我迴歸模型)is a statistical model used to
capture the relationship between multiple quantities as they change over time.
VAR models generalize the single-variable (univariate) autoregressive model by
allowing for multivariate time series. VAR models are often used in economics
and the natural sciences. VAR models do not require as much knowledge about the
forces influencing a variable as do structural models with simultaneous
equations. The only prior knowledge required is a list of variables which can
be hypothesized to affect each other over time. (Wikipedia)
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