Signals of a Declining Economy with Treasury Yield Curve Rates, Inflation Rates, and Cryptocurrency

To determine how the economy is doing you have to look at a lot of different factors, but in this we will focus on the outlook of the Treasury Yields, Inflation rates, and a new determining factor, Cryptocurrency. Now lets look at what exactly is a Treasury Yield.

By Definition, Treasury yields are the total amount of money you earn by owning U.S. Treasury notes or bonds. They are sold by the U.S. Treasury Department to pay for the U.S. debt. The most important thing to realize is that yields go down when there is a lot of demand for the bonds. That's why yields move in the opposite direction of bond values.

How Does It Work?
According to https://www.thebalance.com/treasury-yields-3305741 Treasury yields are determined through supply and demand. The bonds are, in the beginning, sold at auction by the Treasury Department. It sets a fixed face value and interest rate. If there is a lot of demand, the bond will go to the highest bidder at a price above the face value. This lowers the yield. The government will only pay back the face value plus the stated interest rate. Demand will rise when there is an economic crisis. This is because investors consider U.S. Treasury's to be an ultra-safe form of investment. If there is less demand, then bidders will pay less than the face value. It then increases the yield.
Yield prices change every day because almost anyone keeps them for the full term. Instead, they are resold on the open market. Therefore, if you hear that bond prices have dropped, then you know that there is not a lot of demand for the bonds. Yields must increase to compensate for lower demand.

Looking at government resources https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2017 you will find that Yields from 2016 to 2017 have been increasing, which again means that there is lower demand for bonds.

How Does it Affect the Economy
As Treasury yields rise, so do the interest rates on consumer and business loans with similar lengths. Particularly important because there has been a huge increase in 2017.
Investors like the safety and fixed returns of bonds. Treasurys are the safest since they are guaranteed by the U.S. government. Other bonds are riskier and therefore must return higher yields in order to attract investors. To remain competitive, interest rates on other bonds and loans increase as yields rise.
When yields rise on the secondary market, the government must pay a higher interest rate to attract buyers in future auctions. Over time, these higher rates increase the demand for Treasury's. That's how higher yields can increase the value of the dollar, but can confuse investors to determine how exactly the economy is doing, so it is very important to consider this when making investments.

How They Affect You
The most direct manner in which Treasury yields affect you is their impact on fixed-rate mortgages. As yields rise, banks and other lenders realize that they can charge more interest for mortgages of similar duration. The 10-year Treasury yield affects 15-year mortgages, while the 30-year yield impacts 30-year mortgages. Higher interest rates makes housing less affordable, thereby depressing the housing market. It means you have to buy a smaller, less expensive home. That can slow Gross Domestic Product growth.

Future Financial Outlooks
Looking at the outlook in the medium-term, there are ongoing pressures to keep yields pretty low. Economic uncertainty in the European Union keeps investors buying traditionally safe U.S. Treasury's. Foreign investors, China, Japan and oil-producing countries in particular, need dollars to keep their economies functioning. The best way to collect dollars is by purchasing Treasury products. The popularity of U.S. Treasury's has kept yields below 6 percent for the last seven years.
In the long-term, four factors will make Treasury products less popular over the next 20 years.
The huge U.S. debt worries foreign investors, who wonder if the U.S. will ever repay them. It is a main concern for China, the largest foreign holder of U.S. Treasury's. China often threatens to purchase less Treasury's, even at higher interest rates. If this happens, it would indicate a loss of confidence in the strength of the U.S. economy. It would drive down the value of the dollar in the end.

One way the U.S. can reduce its debt is by letting the value of the dollar decline. When foreign governments demand repayment of the face value of the bonds, it will be worth less in their own currency if the dollar's value is lower (not good for the american people when there is an increase in inflation as noted later in this article)
The factors that motivated China, Japan and oil-producing countries to buy Treasury bonds are changing. As their economies become stronger, they are using their current account surpluses to invest in their own country's infrastructure. They aren't as reliant upon the safety of U.S. Treasurys and are starting to diversify away.
Part of the attraction of U.S. Treasury's is that they are denominated in dollars, which is a global currency. Most oil contracts are denominated in dollars. Most global financial transactions are done in dollars. As other currencies, such as the Euro or the Yuan, become more popular, fewer transactions will be done with the dollar. This will end up lessening its value and that of U.S. Treasury's. Cryptocurrency is another avenue on how other countries can depend less on the U.S dollar.

Taking a look at Inflation Rates
Inflation is defined by https://www.investopedia.com/university/inflation/inflation1.asp#ixzz53X7NZ2ai
as a sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change. Under conditions of inflation, the prices of things rise over time. Put differently, as inflation rises, every dollar you own buys a smaller percentage of a good or service. When prices rise, and alternatively when the value of money falls you have inflation.
The value of a dollar (or any unit of money) is expressed in terms of its purchasing power, which is the amount of real, tangible goods or actual services that money can buy at a moment in time. When inflation goes up, there is a decline in the purchasing power of money. For example, if the inflation rate is 2% annually, then theoretically a $1 pack of gum will cost $1.02 in a year. After inflation, your dollar does not go as far as it did in the past. This why a pack of gum cost just $0.05 in the 1940’s – the price has risen, or from a different perspective, the value of the dollar has declined.
So How Does the U.S look when it comes to Inflation?
According to http://www.usinflationcalculator.com/inflation/current-inflation-rates/ you can see on the charts that inflation rates have increased significantly since 2015, tying it back to purchasing power that means that the U.S. dollar has been on the decline, not to mention that with the new tax reform according to http://time.com/5015271/republican-tax-plan-deficits-trillion/ will add $1.7 trillion dollars to the deficit. NOT GOOD AT ALL!

As you have already heard there have also been huge rises in the Cryptocurrency market. Part of this can be said that its the best way to bring up some economies during difficult times, like we are seeing in some countries like Greece, Zimbabwe, or what we might see in Venezuela. My biggest concern is that people aren't even aware of how the financial markets are looking and are not even considering a huge shift. I have cited that the Treasury Yields have been increasing, the inflation rate is increasing, other countries are pushing away the U.S dollar, and we are adding to our deficit. If you are still speculating on Crypto, let this information be a way to at least let you take a really good look at it. Many wall street investors deep down inside are scared and will say anything to keep their stock money alive, but the truth is that things are lining up perfectly for a new economy where Cryptocurrencies will rise and the fiat will crash. I am one of those who is predicting that we are living in a time where we might witness the biggest shift of income of wealth that has ever existed globally. Technology will be the biggest factor of this change and at this point we can either embrace it or lose substantially on this opportunity. Don't be a loser...