Wednesday, May 13th, 2009
6

# The Yield Curve Explained (Includes Blowjobs)

Yesterday Bloomberg's Caroline Baum wrote a column on the yield curve, which she claims is the best economic indicator available. Or at least that's what I think she said; although she took great care to explain it, my brain goes into automatic lockdown once anything more complicated than division is discussed. I appealed to the wise folk of the Internet to help sort it out for me, ideally using phrases like, "Let's say you have two apples," or "The yield curve is like a bowl of fruit." Reuters' Felix Salmon kindly obliged, going so far as to use those examples. It started to make sense! Then Awl pal Jasmine put it in terms that were even more understandable to me: terms that included "blow jobs."

What is the yield curve?

literally, the line on a graph. that starts low and curves up across the horizontal axis.

yield = interest rate: i need money. you offer to give me money. if you lend it to me but want it back the next day, maybe what you get in return is a hand job or not even. i'll flash you, let's say. BUT if you let me have it for a year, 5 years or 10 years, you'll get multiple blow jobs because i'm so happy that you've committed to giving me the money for a long period of time.

the more money you give me and the longer you let me have it for, the more you get in return (i.e. the blow jobs, more commonly known as the interest rate).

the yield curve is the relationship between the two.

if you told me lending me \$25 for the day would cost me a blow job, i'd never do it. inversely, if i told you i wanted \$1000 and would pay you back in a year, you'd never give it to me if i just flashed you. (or would you?)

some smart people got together and figured out a few exact numbers about exactly when and how much certain interest rates (blow jobs) over certain periods of time (a day, 5 years) generally get people to lend (i.e. buying bonds, parting with their money for whatever reason). that article was basically about how everyone assumes that "reasonable person assumption" that went into creating those numbers doesn't exist at the moment…and she disagrees, she says it hasn't gone anywhere, we're all still reasonable people.

i have no idea if i agree with her/any of that.

I don't either, but now I know everything!

Tags:

So, when I give a gal \$300 for a blowjob without ANY expectation that she will ever pay me back, that makes me a complete fucking moron, yes?

BoHan (#29)

Yes, although you could be Chrysler Motor Credit.

No, sir. You pay the \$300 to make sure she never comes back to you.

That is why the analogy used in this post does not make sense.

Abe Sauer (#148)

Ã¢â‚¬Å“reasonable person assumptionÃ¢â‚¬Â. Is that where you agree on the \$1000 for a year-later's blowjob but then a year later the blowjobee's attractiveness has deteriorated so badly that you no longer want the blowjob and are happier allowing the loan to default?

Patrick M (#404)

You like blowjobs? Well, I got her phone number.
How ya like those blowjobs?

whowhahuh (#57)

Well what's happening today is, you'd have give a lot more bj's (higher interest rates) if it wasn't for the government backstopping (they will guarantee you get laid, the return of principle, at the end of the loan, as well as still receive your annual or bi-annual bj's) many kinds of loans/ injectins, gov't programs out there today.

She's right to a point, but rates are artificially low. She says this doesn't matter, only that the slope/ spread matters. I don't agree, but I'd have to go off topic (bj's) to explain why