Entries for December 01, 2006

When President Clinton left office on Jan. 20, 2001, the 30-year U.S. treasury bond was trading at 5.55 percent. The U.S. government had just posted its third straight year of budget surpluses. Fiscal rectitude was a key feature of Clintonomics/Rubinomics under the theory that such prudence would encourage bond investors to accept lower rates of return, thus lowering interest rates and boosting economic growth. In fiscal 2000, the surplus was $236 billion. In 2001, the federal budget was again in the black, registering a $128 billion surplus.

Just for fun, let's say that Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke are wildly successful on their jawboning trip to China in mid-December. Although there's no formal announcement, within days, the yuan begins to gradually appreciate against the dollar. Over the next two years or so, it rises some 20 percent against the greenback.