The US Yield Curve: Another Lost Decade?

Published on
December 13th, 2017
29 minutes

The US Yield Curve: Another Lost Decade?

The Expert View ·
Featuring Jeffrey Snider

Published on: December 13th, 2017 • Duration: 29 minutes

The flattening US yield curve is not what matters, according to monetary economics expert Jeff Snider, but the nominal level at which it flattens. He argues that if the current moves just take us back to where we were at the depths of the 2008 crisis, the US economy could now be entering a second lost decade of growth. Filmed December 5th, 2017 in West Palm Beach, Florida.


  • MM
    Mike M.
    17 May 2018 @ 01:02
    Mike M Let's hope the Chinese don't force a new monetary system on the world. Partially Gold backed Renminbi anybody?
  • CR
    Cristian R.
    7 May 2018 @ 11:01
    Absolutely fantastic video. Brought up many things I'd never considered and over turned some pre-existing ideas, but his reasoning is sound. I'll definitely have to watch this again. Here I was considering buying T Bills. Thanks RV, please bring him back.
  • AN
    Amanda N.
    21 February 2018 @ 16:11
    great video. I think it will take a big shift to make the reform of global monetary system. (eg. like a war, a breakthrough technology that similar to the discover of the North America, land on other planets etc.. ) that said, I think the fed hike rate at the same time tighten up money supply is a very bad move.. it will have consequences in the market .. there will be blood on the street before they go back to the old game. like he said, the economy has not been improved despite the employment figures etc... so what if a lost decade ? in my view a lost decade is better than jump off the roof and eat each other alive .....remember it is not the normalise of interest rate , pay back debt that saved the great depression.. It is the WW2 that did that.! 'In the long run, we are all dead ! "
  • JC
    John C.
    5 January 2018 @ 21:13
    Great video enjoyed it!
  • DS
    David S.
    14 December 2017 @ 07:04
    The unemployed are only part of the problem. In the old days full employment meant full wallets and more consumption. Now the consumers are not flush with money to spend. They just try to make ends meet. The wealthy cannot spend like millions of regular family or single parents. Consumption in the US will not pick up with "full employment", it will pick up when consumers have money to spend without going further into debt. Since this is impossible, we will be lucky to have low growth regardless of the money supply. Of course the good news for investors is that the increase in money supply will add to the inflation on stocks, houses, and other hard assets - ergo the last ten years. DLS
    • JC
      John C.
      5 January 2018 @ 21:13
      Too much consumer debt and Boomers retiring to get back to the good old days I think. We're going to be lucky to 'muddle through' but that's probably how it will go from here on out.
  • SD
    Scott D.
    14 December 2017 @ 09:12
    My interpretation of the UST yield curve is far simpler - short end rates are rising because of Fed rate hikes, while longer rates have been subdued due to European and Japanese investors en mass fleeing their negative rate regimes, buying USTs. Additionally the big four central banks have bought close to $15T of government bonds which is another reason why the longer end is lower than past history would predict. I do not see a lost decade of growth - but invigorated growth as policy rates are inevitably normalized around the world. Economies will actually do better with higher rates. Many investment managers still wrongly believe that emergency monetary policy is indicative of problems in the economies. Normalized rates the world over will be the all clear sign to risk up.
    • DS
      David S.
      17 December 2017 @ 02:32
      Well said, but not too fast. DLS
    • JC
      John C.
      5 January 2018 @ 21:11
      The central banks are in a box now they can't raise or 'normalize' rates very much or they will simultaneously kill off the equity, bond and RE markets and also choke off government spending. I guess the "Debt Jubilee" argument then comes into play but suffice it to say that it will be a big debt haircut along with a huge loss of entitlements, including pensions.
  • FG
    Fred G.
    27 December 2017 @ 03:23
    I have now listened to this piece twice, and want to thank Real Vision for bringing Jeff Snider's excellent presentation to us. Thank you Jeff for helping me understand the components of the yield curve at both the short end and long end - and what they might be telling us today.
  • SO
    Sean O.
    25 December 2017 @ 05:16
    alternative view:
  • CM
    CRAIG M.
    13 December 2017 @ 22:36
    Excellent Interview; clear and concise. I would have liked Jeff to give us the actual alternate unemployment rate to which he alludes if the 15-16 million long-term unemployed were added to the labor market denominator. Instead of 4.1% would it be 8%? Is his alternate measurement the same as U6? Or is it something different? If the BLS is understating the real unemployment rate, is a similar phenomenon happening in the measurement of inflation, where hedonics and substitution paint a false picture of low inflation? There is an alternate index called the Chapwood Index ( which measures the prices of 500 goods and services over the 50 largest US cities. Using the Chapwood Index, US inflation has averaged 8%-13% per year for the last 5 years. Using Minneapolis as an example, the 5 year combined inflation rate has been 48%. This is a serious loss of purchasing power when bond investment returns are 2% or 3% per year. What investment would one hold if the average investor lost 50% of their real purchasing power in just 5 years? In a future interview, I would love to have Jeff address the continuing, insidious destruction of purchasing power. What happens when "Money" slowly dies? Is money still money if it is no longer a store of value?
    • EF
      Eric F.
      14 December 2017 @ 19:57
      Interesting. In looking at a lot of the turmoil in the world I have to agree with comments here as being a significant contributor to that. Reported inflation has not been accurate and how is shrinkflation accounted for?
    • AM
      A M.
      19 December 2017 @ 19:44
      Central banks and Govts are colluding by manipulating statistics. Their unwritten policy is to try & let inflation eat away the value of the enormous debt loads by letting interest rates lag behind the inflation rate. It is just another way of reneging on debts. A better class of default!
  • JC
    Joseph C.
    15 December 2017 @ 00:38
    The basic analysis is fine in a vacuum. But the three main things we need to overlay are: QE by central banks (causing distortions in the bond markets), aging demographics (and the need for longer term fixed income by pensions and insurance companies), and structurally low inflation (technology, globalization, etc).
    • AM
      A M.
      19 December 2017 @ 19:26
      I agree, add in the collapse in the velocity of money due to the influence of disintermediation caused by the rise of the internet, and it is clear we are becoming Japanese.
  • DF
    David F.
    19 December 2017 @ 15:22
    Having listen to this twice and having lived in Japan when there crisis hit. The question I believe should be asked is "What is the effect of debt on the long term yield curve? At some point debt must stop being a working part of the economy and starts depressing inflation and confidence in the economy." An asian economist working in Japan has insisted that this is a balance sheet recession and that the global balance sheet needs to be fixed first, for a recovery to take place.
  • IP
    IDA P.
    14 December 2017 @ 07:36
    So as for the US Dollar, on one hand we have the bullish camp (Jeffrey Snider, Russell Napier, Brigden, Raoul Pal I believe) as they demonstrate that there is a lack of dollars in the system, and a tax reform that brings some of those dollars home accentuate the problem, which could be contrasted by regulatory changes, but this is the actual reality. On the other hand you have Felder and Weldon who demonstrate that with tax reform passing, you will have twin deficits which are very bad for the dollar. These are all smart people, Milton could you organize a debate? or explain how everyone could be right? Could we conclude that dollar go bullish short term like 6 months if the as reform goes through and then down again long term? Too much information can be paralyzing. I know Milton that you only pass through information, but I wish that we could find a way to connect the dots here, or am I missing something?
    • MB
      Matthias B.
      14 December 2017 @ 10:54
      A debate like a panel discussion would be a great idea! yes please.
    • M.
      Milton .. | Founder
      14 December 2017 @ 13:31
      I say – what a damned fine idea. Thank you to ida i and Matthias B. for this thought. You are absolutely right. The direction of USD is going to be a hotly contested topic in 2018 with two distinct camps forming. Your suggestion of a debate on this subject is splendid. I’ll speak to the team here and make sure they set up a shoot it in the New Year. Watch this space…
    • IP
      IDA P.
      14 December 2017 @ 18:01
      thanks Milton, Ida Pagnottella, Italy
    • GS
      Gordon S.
      14 December 2017 @ 21:10
      @Milton R.: Sounds awesome, thanks!! While you are at it, another debate asked for by the RV community (and myself) for a while is a debate on China, preferably with Kyle Bass on the bear side :). A future debate format would be freakin' awesome! :).
    • TH
      Timo H.
      16 December 2017 @ 17:45 will have such debate before the year end. Jeff Snider vs. Mark Yusko & Luke Gromen . Should be epic...
  • AV
    Andrija V.
    14 December 2017 @ 03:43
    This is an excellent interview. The key point is the following: Economic growth comes from the expansion in money supply (i.e. broad money). Broad money growth comes from commercial banks granting loans/credit and in the process creating deposits. These loans/credit are used to build factories, bridges, pay wages, etc.. Crucially here, and what Jeffrey states, commercial banks do not lend bank (excess) reserves. Excess reserves are simply liquidity for the banking system. Broad money supply growth in the U.S. and globally (China specifically) have been decelerating and this represents a trend worth monitoring. The bond market seems to catch this trend, while central banker/economists don't have a clue what is happening (mainly because their textbooks are wrong) Again, great interview, hope to see Jeff Snider soon again on RV.
    • VP
      Vash P.
      14 December 2017 @ 05:57
      But why would commercial banks NOT lend excess reserves? Wouldn't it be in their best interest to do so? Or are you saying they are forced into not making use of those reserves because of some regulatory pressure?
    • GS
      Gordon S.
      14 December 2017 @ 21:04
      @Vash P.: According to Zero Hedge excess deposits are indirectly used to prop up the stock market via repo. See for example: or
    • LP
      Lynn P.
      14 December 2017 @ 21:55
      Gordon-Excellent reminders. Have there been any changes such that limit banks' use of excess reserves to invest in financial assets, or do we still not really know the extent to which asset prices are supported in this way (of course, we know that the Swiss central bank owns a hunk of Apple (among other US stocks) and the BOJ owns Japanese ETFs.) The investing point being: what is the risk that the Fed's reducing its balance sheet will force the sale of financial assets that have been funded by these excess reserves?
    • GS
      Gordon S.
      16 December 2017 @ 13:10
      @Lynn P.: I am not sure, but personally I don’t think much has changed. On the topic, another must watch is Daniel Want’s presentation: He argues, that it is difficult to tell, whether or not QE has a direct impact on asset prices. Since treasuries (or in general high quality collateral) can be used in repo to buy other financial assets, soaking up these assets can in some sense withdraw liquidity of this shadow money. Although shadow money (= high quality collateral) and reserves have different properties, I personally believe them to be quite fungible. (That would mean, that the Fed’s main job is to back-stop US debt, wether it owns it or not is not that relevant.) Another ZH master piece on the subject would be this one: On the topic of shadow banking, ZH’s focus in recent years has shifted to China where it seems that now - more than ever - equities are pledged as collateral to secure funding, see in particular this article: If anyone is inclined to further go down the shadow banking rabbit hole, I held a lecture on that topic in June. Though it is quite low level stuff, I have included a long list of related ZH articles one may find useful :).
  • TS
    Thomas S.
    16 December 2017 @ 03:57
    Exactly right
  • EL
    Edward L.
    15 December 2017 @ 16:32
    Brilliant educator. I will listen to this several times.
  • SR
    Steve R.
    15 December 2017 @ 09:43
    PS: If you are going to have a USD debate, you should include Juliette DeClercq from JDI. She has been incredibly accurate in her USD predictions and is not a USD bull. PPS: You can find here latest thoughts on today's MacroVoices podcast, which has a fantastic chart deck! Enjoy!
  • SR
    Steve R.
    15 December 2017 @ 09:33
    Brilliant! I just found myself agreeing with everything he said!
  • PP
    Patrick P.
    15 December 2017 @ 04:09
    If you understand the distortions with the Eurodollar, out of control debt, endless war spending and the clueless Federal Reserve (QE).......then you throw on the curse/reward of the reserve currency in the new global economy it all starts to make sense. Japan was sort of the canary in the coal mine. But America is different..... I can't see anything but a lot of financial pain ahead. Just being a realist.
  • GS
    Gordon S.
    14 December 2017 @ 21:47
    Thanks for having Jeff Snider back! A small detail on the format: It would be nice if a little more time could be left to read the questions (or read the questions aloud from the off?). On some occasions (c.f. at 11:28 for example), the question is blended in almost as Jeff starts talking again (question still displayed). I found it annoying.
  • WS
    William S.
    13 December 2017 @ 17:58
    I could listen to Jeff all day long for a week and not grow bored. Great stuff as always. I also *HIGHLY* recommend his most recent weekly essay on the RealClearMarkets site:
    • LP
      Lynn P.
      14 December 2017 @ 21:06
      Is this essay Snider's "answer" to the current problems in global finance?
  • NH
    Neil H.
    14 December 2017 @ 20:44
    I have been thinking for awhile about Japanification. it seems like the U.S. is following the same game plan.
  • FC
    Fractal C.
    14 December 2017 @ 20:11
    Awesome interview until the last three minutes. The prescription / solution is not to fix the monetary "system". The thing is, there is just too much debt in the system that is reducing the velocity of money and massively subduing the future growth. Besides, QE is bringing all the future consumption into current time frame. No wonder the long term growth is negatively affected as a result. That is what the bond market is saying. Besides, economy has structural issues such as deflation driven by AI / automation and technology that is causing long term growth issues
  • JP
    Janusz P.
    13 December 2017 @ 22:13
    Lost decade? Probably even longer than that. At least since around '98. But I think the solution is much simpler than one would think. The world would be much healthier now if it wasn't for all those bailouts, Washington catering to the richest and stupidity of Greenspan and his followers. You can't get a healthy economic growth if you keep helping widen the gap between rich and poor with nobody in between.
    • EF
      Eric F.
      14 December 2017 @ 20:01
      Yup, certainly in UK & US the middle class - and the stability it provides - has been wiped out. I am anything but left wing but can't help but look at how Europe has protected it's middle class and has managed to fight off the extremes that upended both the UK and US. Brexit and Trump are not isolated, accidental events - reap what you sow.
  • MR
    Marten R.
    13 December 2017 @ 23:15
    Love Jeff Snider. Amazing insight and depth of understanding. A big thumbs up for this content which should be watched at least twice to ensure that all the concepts are understood / digested.
    • EF
      Eric F.
      14 December 2017 @ 19:55
      Agreed, listen to this via audio but needs another pass and will watch video this time.
  • JL
    J L.
    13 December 2017 @ 15:17
    Druckenmiller on CB policy this week, worth a watch if you haven't
    • PC
      Peter C.
      13 December 2017 @ 15:40
      thanks for the link. Druckenmiller is always worth listening too.
    • CR
      Charlie R.
      13 December 2017 @ 15:57
      Yes! Thx for link!
    • PP
      Patrick P.
      14 December 2017 @ 18:01
      Ditto an the Thanks !
  • JH
    Joel H.
    14 December 2017 @ 17:52
    Every time this guy talks I find that I get a lot out from what he is saying. Interest rates, employment, Japan's lost decade, all seem to fit together when you view the world from this broken monetary perspective. I found myself going back and looking at his earlier presentations, I just get so much out of them. Thx RV, Thx Jeff!
  • HJ
    Harry J.
    14 December 2017 @ 15:23
    Jeff did a great job of laying out data. Maybe the long term effects of these conditions on retired persons will lead to acts of desperation / massive need of economic assistance and a huge drag on t
  • RI
    R I.
    14 December 2017 @ 14:03
    I've said it before and I'll say it again: please provide more content on credit and fixed income markets in general. This presentation about the yield curve (right or wrong) is eye opening insofar as it enlightens the audience about the largest (yet most ignored) asset class on earth: fixed income.
  • SD
    Stephen D. | Contributor
    14 December 2017 @ 07:24
    Jeff Snider knows his stuff and I learnt a lot form this piece. I've been confused and wrong about inflation for at least 7 years so I focus on TIPS curves as well as rates. The US Dept of Treasury updates these daily. Your yield is CPI + whatever the rate is, so it gives a very pure 'rate of return'. Right now the rates are amongst the highest of the year but at 5 year +0.38%, 10 year at 0.48% and 30 year at 0.79% it's giving a grim return forecast for 30 years, not just 10.
  • TS
    Tim S.
    14 December 2017 @ 06:56
    Awesome, just fricking awesome. Incredible production value with a stunning and accessible narrative from Mr. Snider. I am pretty sure I have a Man Crush on him. ;->
  • DS
    David S.
    14 December 2017 @ 06:27
    It is time to stop thinking that the long-term interest rate is a "real return" plus a couple of percentage points for inflation. That dog will not hunt, and has not hunted for a long time. It is simple supply and demand. Investors go to the market and have to choose from what is available. The yield curve is a resultant not engineered. DLS
  • RR
    Raj R.
    14 December 2017 @ 04:27
    Or even the fed knows there is no real recovery, no inflation, no full employement and is just getting ready to have some dough during the next downturn. So markets and fed are saying the same thing,
  • ZH
    Zack H.
    14 December 2017 @ 01:06
  • BG
    Bruno G.
    14 December 2017 @ 00:44
    Supreme. Thank you
  • JS
    John S.
    13 December 2017 @ 22:07
  • TJ
    Terry J.
    13 December 2017 @ 21:34
    What a guy! An absolute masterclass in what the bond market is telling us. I have been following Jeff's insights since I was first introduced to him by Real Vision a couple of years ago, and never miss a blog! My money will be on Jeff's interpretation of the bond and eurodollar markets, rather than all the blinkered economists at the Fed, every time! Thanks for another invaluable video Milton.
  • EK
    Emil K.
    13 December 2017 @ 14:47
    Did you enjoy Jeff's interview and would like to learn more about the topics discussed? Check out his daily blog posts at AlhambraPartners and weekly essay at RealClearMarkets. I couldn't recommend them more; so much of the 'nonsense' from the last 10 - 20 years makes sense when viewed through Jeff's framework.
    • MF
      Martin F.
      13 December 2017 @ 19:24
      100% agree. He's outstanding as is his blog.
    • IP
      IDA P.
      13 December 2017 @ 20:26
      Jeffrey Snider is an expert of the eurodollar system, and has been interviewed recently by Eric Townsend on for a 5 part series called eurodollar university, really excellent, he explains why there is a lack of dollars in the system , and is therefore very bullish on USD, very very interesting
  • RL
    Ryan L.
    13 December 2017 @ 18:56
    Great interview; I thoroughly enjoyed the big picture view and supporting evidence. The charts were great too!
  • PD
    Paul D.
    13 December 2017 @ 18:52
    I think the missing term premia is in part due unfunded/underfunded pension funds having been left with nothing to buy....they have to buy long dated stuff, plain rubbish, or increasingly rubbish long-dated stuff. One other point on the chart about things going wrong with the path of GDP - perhaps his long-term line should have been much flatter to reflect Greenspan had rates miles too low post the dotcom bust - it wouldn't look nearly as bad then. Interesting interview overall - Jeff seems to be kind of Neo-Fisherite in his thinking. I don't think the market is necessarily a cast iron forecaster of future inflation, perhaps the yield/vol malaise/supression is creating a false sense of calm. I was waiting for the answer about the monetary system at the end and it didn't quite come. Maybe next time! Thanks.
  • RJ
    Robert J.
    13 December 2017 @ 18:49
    Excellent presentation explaining the distinction between motion and progress. Jeff is casting pearls in front of the swine! Please make him a regular presenter - perhaps quarterly or bi-annually. Thanks RV and Thank You Jeff Snider.
  • LJ
    Lucille J.
    13 December 2017 @ 18:44
    I love this guy
  • GF
    George F.
    13 December 2017 @ 17:42
    What is Japanification? High speed trains. Dingy Michelin rated restaurants in subways. High quality housing and medical care. What exactly is the problem? I know about population growth, why is that a problem?
  • RA
    Robert A.
    13 December 2017 @ 17:41
    Interestingly, his timeline is very similar to the Reinhart and Rogoff timeline of lower rates to 17-20 years based upon data for hundreds of years of post credit collapses in many different areas of the World.
  • IH
    Iain H.
    13 December 2017 @ 17:11
    Great interview, Jeff is a wizard on this topic, for more try MacroVoices and Jeff Sniders Euro Dollar University series.
  • AH
    Andreas H.
    13 December 2017 @ 16:52
    there is no reform coming, the whole argument is normative, we are going to muddle through and central banks are going to buy deficits and let them disapear and people will still believe in money afterwards. But also believe that reflation trade is stalling now and that it can be faded, go long TLT for the next three months is a good idea...
  • JH
    Jesse H.
    13 December 2017 @ 16:33
    Absolutely brilliant piece of analysis and presentation. Thoroughly enjoyed this one. Please bring Jeffrey Snider back!
  • GF
    George F.
    13 December 2017 @ 15:59
    It always surprises me that someone can talk about the big picture of the last 10 years without talking about the 'forever war'. I would like to hear more about this new monetary system.
  • NS
    Niek S.
    13 December 2017 @ 15:59
    This is one of the best educational interviews I've seen on RV, great content and amazing insights!
  • CR
    Charlie R.
    13 December 2017 @ 15:31
    Great concise synthesis of Snider's comprehensive work/understanding/teaching on the "actual global monetary system!" Thanks Jeff and RV!
  • GR
    Gregory R.
    13 December 2017 @ 15:04
    Wow .. this was good! Finally some analysis that doesn't ignore the millions of prime age people that are not working (15 million? It is more like 25 million). Mr. Snider's point is difficult to refute. The long is end represents the collective wisdom of the market and cannot manipulated or cajoled by incorrect analysis or giddy perceptions of reality.
  • CP
    13 December 2017 @ 14:57
    Best thing I have seen on RVTV, amazing insight. Thank you Jeff.
  • SW
    Scott W.
    13 December 2017 @ 14:55
    One view on action/event traces through time posits there is a continuum wherein the effect of said event lasts "forever" - that one can never draw a line in time and say "material effect from this is done". Another view posits the affect on real time of some past action/event fades with time, asymptotically approaching some negligible steady state - if not practical irrelevance. Taking the latter view, could one construe current monetary circumstances as a fading residual of World War II - wherein the US was the last man standing, unscathed, young, healthy, growing, with open and unspoiled lands and resources - and the appointed owner of world reserve currency? That as the final material impacts of WWII fade and as the "last man standing" diminishes with Chinese and Indian economic growth and modernization (among others), so too should USD as world reserve currency?
  • JL
    Johnny L.
    13 December 2017 @ 14:40
    a fantastic discussion that continues to be ignored by WS on entirely separate views. I suspect WS will be coming in stubbornly or by force to the same conclusions before too long.
  • EL
    Elizabeth L.
    13 December 2017 @ 14:11
    Brilliant work Jeff. RVTV thanks for bringing Jeff back. Appreciate the visuals to assist in understanding.