So, here are the numbers. The currently estimated U.S. (noninflationary) growth potential is 1.5 percent, while the annualized sum of the monthly increases of the core Private Consumption Expenditure Index — the guiding light of American monetary policy — in the first six months of this year came in at 1.4 percent. Add those two numbers and you get 2.9 percent as an estimate of the ten-year bond yield.
It, therefore, seems that the current 2.34 percent yield of the ten-year benchmark bond is about right.
Now for the bad part.
U.S. markets are ignoring the huge domestic political risks. And since Uncle Sam has a proverbially long hand, Washington is also involved in major trouble spots threatening geopolitical stability.
Domestically, by paralyzing their own executive authority, the Republicans seem ready for their electoral bloodbath in Congressional mid-term contests a little more than a year from now.
In view of that, President Donald Trump should do what Ronald Reagan did when he was fighting a hostile, Democrat-controlled Congress: Go directly to the American people with policy speeches and rallies instead of tweeting incendiary one-liners. The president should not allow to be pushed into foreign policy adventures where the Congress can sap his actions to seal his political faith.
Further afield, China and India are on the brink of war with unpredictable consequences. Losing patience with what they see as Delhi's dilatory tactics, China's military told India last Thursday to immediately withdraw its troops from territory in the Himalayas.
Even if that military standoff is resolved peacefully, China and India have a lot to talk about — not just about their bitterly contested border claims.
China is accusing the West (read: the U.S.) of having cooked up the border clash to break up the BRICS (Brazil, Russia, India, China and South Africa) and a security arrangement called the Shanghai Cooperation Organization that just admitted India after long years of hesitation by Beijing. China also sees an American attempt to use India to sabotage Beijing's epochal project for a new Silk Road, connecting Asia, Africa and Europe.
And China is a country Washington apparently wants to work with to rid the Korean Peninsula of nukes and Intercontinental ballistic missiles that, allegedly, can reach any point in the continental U.S.
Meanwhile, China is chasing the U.S. planes and naval assets around its maritime borders. Beijing is also furious about $1.4 billion of sophisticated military technology Washington is supplying to Taiwan. That, in China's view, is a direct assault on its sacrosanct "One China Policy."
Europe, of course, is an even greater mess. Poland and Baltic states are egging Washington into a military confrontation with Russia, because the proxy war in Ukraine is not enough. Those countries are also turning on Germany and France for being "too soft on Russia." Poland is facing European Union sanctions, but is also going to shock Europe with a huge WWII reparation bill it is drawing up for Germany. West Balkan enmities are back to the boiling point, and the U.S.-controlled NATO alliance is seen fanning the fires to stop the Russians.