How Different Is It This Time?

Yesterday we asked our readers when they thought the following headline appeared in BusinessWeek:

“Ignore That Rate Curve: Narrowing Of T-Bond Yields No Longer Means A Slowdown."

Of the eight choices presented, 46% of the respondents correctly said February 7, 2000. Interestingly, 20% of respondents guessed that the headline was written on February 7, 2006, which is certainly understandable given some of the commentary we’ve been hearing lately.

In 2000, the conventional wisdom said it’s different this time because the yield curve was being artificially inverted due to the low outstanding amount of thirty-year treasuries. We all know what happened shortly after this article.

Today, we’re told that it’s different this time because China and Japan are buying US Treasuries and thereby keeping yields on long-term paper artificially low. This leads us to ask, If Europeans or Americans were the ones buying bonds instead of the Chinese or Japanese, would it still be artificial buying?

The point of the poll was to show that while this certainly won’t be the first or last time we ever hear the term it’s different this time, we should be on guard, because whenever it’s different, it usually isn’t.