Did Shakespeare Make the Wrong Decision Going Into Liberal Arts and Not Finance?
Rarely do central bankers provide evidence that William Shakespeare may have erred in career choice. But today Andrew Haldane, the Bank of England’s chief economist, presented a chart suggesting exactly that.Possibly also of interest:
As part of a wide-ranging speech on topics such as secular stagnation and artificial intelligence, Mr. Haldane presented the above chart of short-term and long-term interest rates all the way back to 3000 B.C.
- Modified to highlight Shakespeare’s lifespan. Chart from Andrew Haldane, Bank of England
There are dozens of fascinating stories in this data. One of the more amusing suggests that Mr. Shakespeare may have missed a historic opportunity in the bond market. Approximately during his lifespan in the Elizabethan era, the yield on long-term rates climbed to nearly 10% while the yield on short-term rates appears to be around 3% or 4%. If Mr. Haldane’s figures are correct, Mr. Shakespeare lived through the steepest yield curve in history, as measured by the gap between short-term and long-term interest rates.
Today in the U.S., short-term rates are near zero, and longer-term 10-year rates are near 2%. Even this much flatter yield curve presents a tremendous opportunity for investors to pocket the spread between short and long rates.
But today’s opportunity is nothing compared with that for Mr. Shakespeare, who became a playwright rather than a bond trader....MORE
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