Monday, November 24, 2008

Conundrum

Prof. Hamilton observes that "the yields on inflation-indexed Treasuries for medium-term maturities are actually higher than those for regular Treasuries. If taken at face value, that means investors anticipate an average deflation over the next 5 years at a -1.29% annual rate."

Investors are not a particularly clear voyant race, but it is deeply worrying.

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