a wedge between these two rates of return, causing the real 10 - year yield to decline but the return on capital to be relatively constant? and what does this say about r *? let me start by discussing what is not responsible for this difference in yields. 7 first, it cannot be caused by longer - run trends in productivity. trend productivity affects the real return on capital first and foremost. so even if trend productivity growth was falling over time, both rates of return would have fallen. but, clearly, the real return to capital has not fallen over time. so falling productivity growth cannot be an explanation. second, this difference in yields cannot be the result of declining population growth. again, this would also lower the real return to capital since there are fewer workers to use productive capital, which means the existing capital stock is underutilized, thereby lowering its real return. so, what drove the decline of the real return on government debt? it is obvious that what makes u. s. government debt different from the real return on capital and other interest rates is its safety and global liquidity. i will briefly discuss several factors that see alexander monge - naranjo, juan m. sanchez, and raul santaeulalia - llopis ( 2019 ), “ natural resources and global misallocation, ” american economic journal : macroeconomics, vol. 11 ( april ), pp. 79 – 126. for further review of how different factors are at play, see ricardo j. caballero, emmanuel farhi, and pierre - olivier gourinchas ( 2017 ), “ rents, technical change, and risk premia accounting for secular trends in interest rates, returns on capital, earning yields, and factor shares, ” american economic review, vol. 107 ( may ). - 6have influenced the supply and demand for safe, liquid assets. i will try to make the case that the demand for safe, liquid assets outgrew the supply over the past 40 years, which drove a secular increase in the price of u. s. treasury securities and, thus, a secular decline in their real yield. at the same time, the safety and liquidity of u. s. treasury securities was actually increasing, which made them even more attractive to global investors. to be clear, i am not focusing on day - to - day movements in interest rates from idiosyncratic events that will ultimately unwind. instead, i am thinking about factors that have

behavior – it will hurt bankers ’ own long - term interests and the economy in general. for this reason, we have joined with the other federal banking agencies to issue a series of policy statements to examiners : on the importance of bank lending to creditworthy borrowers, on small business lending, and on commercial real estate loan restructuring. 4 we have followed up this formal guidance with training for examiners and outreach to the banking industry. our message is a simple one : institutions should strive to meet the needs of creditworthy borrowers, and the supervisory agencies should do all they can to help, not hinder, those efforts. we also must support sensible efforts to work with troubled borrowers to bring them back into good standing. to help us better understand what is going on in the banks we supervise and in the communities they serve, we continue to seek many views. for example, our reserve banks across the country are holding meetings with community bankers and others to talk about opportunities for and barriers to small business lending. additionally, the federal reserve continues to demonstrate its commitment to consumer protection in financial services. we have recently overhauled the regulations governing mortgage transactions and implemented enhanced protections for credit card accounts and see board of governors of the federal reserve system, federal deposit insurance corporation, office of the comptroller of the currency, and office of thrift supervision ( 2008 ), “ interagency statement on meeting the needs of creditworthy borrowers ”, joint press release, november 12 ; board of governors of the federal reserve system, federal deposit insurance corporation, national credit union administration, office of the comptroller of the currency, office of thrift supervision, and conference of state bank supervisors ( 2010 ), “ regulators issue statement on lending to creditworthy small businesses ”, joint press release, february 5 ; board of governors of the federal reserve system, division of banking supervision and regulation ( 2009 ), “ prudent commercial real estate loan workouts ”, supervision and regulation letter sr 09 – 7 ( october 30 ) ; and office of the comptroller of the currency, federal deposit insurance corporation, federal reserve board, federal financial institutions examination council and office of thrift supervision ( 2009 ), “ policy statement on prudent commercial real estate loan workouts ”, joint policy statement, october 30. private student loans. we also have made new rules for overdraft protection programs and for gift cards. in addition, we have expanded our compliance program for enforcing consumer protection rules at non