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Posted by: Michael Mandel on June 26
Today the 10 year Treasury rate hit 5.23%, exactly where it was the day after George Bush’s inauguration in January 2001. That is, the federal budget went from $5.6 trillion in surplus (measured on a 10-year time horizon) to $800 billion in deficit, without any noticeable impact on long rates.
Now, be honest. Suppose in 2001 I would have told you these true facts about the next five years:
—the shift in the federal budget from surplus to deficit.
—the very sharp rise in oil prices and the doubling of overall commodity prices
—the strong growth of the global economy (4.0% average from 2000-2005, compared to 3.9% from 1995-2000)
—today’s low unemployment rate (4.6%, compared to 4.2% in January 2001)
If I had told you these facts in January 2001, would you have predicted that long-term interest rates would be no higher in June 2006?
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.