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What is the Proper Level for Interest Rates?
This report attempts to answer that question using a mathematical “fair value” calculation comprised of nominal GDP (a measure of real growth and inflation) and Federal debt (a measure of supply). We compare our “fair value” result to the yield of the 5-year Treasury Note (a proxy to where interest rates actually are in the market). We believe the difference between where rates “should be” and where they “actually are” indicates what the market is expecting, and discounting, for the future.