Bond yields

How can bond yields go much further down than where they are?  Ten year bonds have been under 3% for long stretches since 2008 and are currently under that now.  What happens if the yield approaches zero?  It is a time value of money question.  Why lend money out at all if you get no return for it?  The only reason could be safety, but there are other ways to be safe, is there not?

If safety cannot be provided, then there aren't any reasons at all for buying bonds.  If it won't even provide safety, it is pretty much worthless.  By the same token, if someone borrows money, then they have to be able to pay it back with interest.  Otherwise, why should a lender take the risk?  It is all a matter of common sense.  

But when you start talking governments, common sense just might go right out the window.  Somehow, people with a little bit of power think they can repeal natural laws.  What goes up, must come down.  Congress may disagree with this inconvenient truth, but there it is.  No law can change that.

You can do just so much quantitative easing.  At some point unknown, lenders will stop supporting the system because it violates any common sense.  You need confidence in getting paid back.  Failing that, lenders will stop buying bonds.  Yields must go up.  But if the Fed wants to drive yields back down, it will only accelerate the process.  I think the reason is that if nobody wants the bonds and only the Fed will buy with funny money, then the debt will be seen as worthless.  Confidence is shattered.  They won't hold their bonds, nor will they buy more.  They will sell what they have and bond yields will start rising.  They will rise until the yields are high enough to reflect the risk, then the selling may stop.  The Fed will be helpless to stop this.

We are not at that point yet, but we are getting closer.  The government will have to get serious about getting its financial affairs in order, or this will get ugly.

The Fed is between a rock and a hard place.  Congress and the people have to help them out.  This means stuff has to be given up so that the government can pay for it.  You can't print your way out of this.  The only way out is to grow your way out, or just manage a decreasing store of wealth.  To encourage the former means a growth policy.  Failing that, the choice is for the latter and that won't be pretty.

Obama is a right winger?

I don't know what to say about this one.  It's strange, even for Krugman.  He's saying that Obama is a rightie.

The left must have decided to pressure Obama to move more to the left.  I suppose calling Obama a rightie is supposed to be enough of an insult to get him to see the light.  When looked at like that, it seems more of a visceral argument than an argument based upon reason.  Get a grip.

Son of a gun, it's already in the pipeline

From the new site I registered with earlier today is this link, which brought me to this link.  The thing I was suggesting may already be in the pipeline.  Well, not exactly.

It won't be a sidemount.  It will stack on top of the external tank.

Here's a story on how this (called the Direct Movement) came about.  Another page here
with some more info.

Popular Mechanics story on Direct in Jan. 2009.  Obviously, I was in the dark about
this.  Oops.

If you can't beat 'em, join 'em

I just joined this forum and got a link which led to this video (posted on YouTube).  It's called Bad Astronomy and Universe Today Forum.  Can't recommend nor not recommend as of yet.  To see anything there, you have to register, which is what I did.

Some more thoughts on open source

Here's a quote from Keith Curtis' book "After the Software Wars".

"At Microsoft, we had it beaten into our heads to fix bugs: a bug meant an unhappy customer, and a bug that affected just 1% of users meant that there were millions of unhappy customers!  Software that doesn't work is not worth anything."

For anything open source, bugs may be an issue because no one has a proprietary interest in the product.  That's a strength of proprietary software ( or anything else of intellectual property origin ).  He goes on to point out the bugginess of Linux distributions and how necessary it is to address the bug issue with respect to the future of Linux.

Perhaps the thing to do is to nip it in the bud from the start. Nothing gets in the codebase until it is fully vetted.  It must get a seal of approval and that seal has to be earned.  No point in doing anything if it isn't right.  Better to start on the right foot than to end up on the wrong foot.

Don't reinvent the wheel revisited

I didn't know this before I wrote the original post- that the shuttle external tank reaches 98% of orbital velocity.  With a little more power, it can get into orbit instead of being sent back to a fiery doom during reentry from space.  So, why not use this as a resource as opposed to wasting it?  That's what I was writing about before, so I'll return to that subject again.

The Augustine Commission considered a Shuttle derived system as one of the possible heavy lift vehicles that will replace the Shuttle.  With a little less mass, as would be the case without a shuttle to put into orbit, the Shuttle derived system could reuse its external tank.  Since the tank already has 98% velocity with more mass, the reduction in mass (from not having to lift the shuttle) should make virtually the entire system  reusable.  But not as it is.  Once it arrives in space, it will need a little work to set it up as a permanent facility in space.

The external tank can be remodeled into a useful bit of machinery that could save a lot of money and do something useful.  Instead of putting extra rocketry on its sidemount, it could carry equipment and supplies that would be transferred to the inside of the tank so it can do the remodeling job.  How can you do that?  Well, I think that it would take a few modifications to the external tank in order to make this possible.  You would need to make a large door at end of the tank so that stuff could be put inside the tank after its launched into space.  Think of it as a hood and/or trunk type setup.

Each subsequent launch would add more equipment and supplies, but not a duplicate of what was sent earlier.  Instead, after the first tank was finished, launch the next tank into space.  Transfer the equipment that was no longer needed on the first, and equipment from the second is tranferred to the first for further work on the first.

In such a manner, an assembly line could be set up in space which would build a fleet of large habitats in space for future missions.  All that would be required after construction of one habitat is for a crew to come up in a separate vehicle and transfer to the large habitat.  Not only would the big external tank be a habitat, it would still have a large powerful rocket that could take it on missions back and forth.

 

Robert J Samuelson

I meant to read his book, The Great Inflation and Its Aftermath: The Past and Future of American Affluence, but never did get around to it.  I noticed something recently though, and it got me to thinking about this inflation/disinflation scenario that seems to be playing out.  Look at this chart:

Its a chart of the ten year bond yield since the Kennedy Administration.  Notice the upward slope until Reagan becomes president, then the downward slope since.  Clearly, something changed at that time.  One thing that definitely changed was the income tax code.  Other changes were deregulation and free trade.  


My take on this is that both trends are evidence of something wrong.  The former trend depicts an inflationary environment, the latter depicts a disinflationary one (at least at first).  Yields have gotten so low that, with the yield at less than 3%, it is lower than the historical growth rate of the US economy.  Something about that doesn't seem right.  The time value of money should be higher than what it is now.  The time value of money is reflected by the yield on the 10 year bond shown here.  The market is saying the time value of money is now lower than the historical growth rate of the US economy.  If I am not mistaken, this is symptomatic of a problem.


If I were to guess, it may well mean that the market is saying the US economy can't grow anymore.  If I am right about this, then the only way to reverse the trend is to do something to get the economic potential for growth back.  If that doesn't occur, then the bond yields may go down to zero.  That can't be good.