which likely has pushed down term premiums further. global factors may have put downward pressure on term premiums because of anxiety about the foreign outlook, which may have increased demand for u. s. assets, or because low rates abroad have depressed u. s. term premiums through a global portfolio balance channel. 5 and real rates are quite low globally, reflecting the step - down of productivity growth over the past 10 years as well as shifts in savings and investment demand due to demographic change. 6 the core of the financial system is much stronger before turning to the interplay between low rates and the financial system, i will simply point out that both improved risk management at the largest, most systemically important financial institutions ( sifis ) and stronger regulation have made the core of the system much stronger and more resilient than before the crisis. 7 the sifis have more the changing risk profile of nominal treasury bonds can be seen from its capital asset pricing model ( or capm ) beta, a measure of the co - movement between returns on longer - term treasury securities and the equity market. figure a. 1 shows that the estimated rolling beta of the 10 - year treasury note with respect to the s & p 500 turned from positive to negative around 2000, indicating that treasury bonds are now likely to act as a safe haven, performing well when equity markets do poorly. figure a. 2 shows the response in daily changes in 10 - year u. s. treasury yields to changes in 10 - year german bund yields around european central bank ( ecb ) monetary policy decisions since 2010. the significantly positive regression coefficient is evidence of substantial spillovers from ecb monetary policy to u. s. long - term yields. see rachel and smith ( 2015 ) and gagnon, johannsen, and lopez - salido ( 2016 ). see powell ( 2015 ). - 4stable funding, hold much more capital and liquidity, are more conscious of their risks, and are far more resolvable should they fail. many aspects of our financial market infrastructure, including the triparty repurchase agreement ( or repo ) market, central counterparties ( ccps ), and money market funds, are more robust as well. low rates can mean tradeoffs so far, i have argued that low rates have supported aggregate demand and brought us very close to full employment and 2 percent inflation ; that forces other than monetary policy have been pushing rates lower for more than 30 years ; and that the

ben s bernanke : challenges for state and local governments remarks by mr ben s bernanke, chairman of the board of governors of the federal reserve system, at the 2011 annual awards dinner of the citizens budget commission, new york, 2 march 2011. * * * i am pleased to have the opportunity to speak to a group that has such a long and distinguished record in identifying and addressing crucial issues affecting the governments of the city and state of new york. i will focus this evening on a top challenge not only for new york, but also for states and localities across the nation – namely, the imperative of achieving fiscal sustainability in both the short and the long term. i will first discuss the fiscal pressures currently confronting states and localities, then turn to longer - term challenges and opportunities faced by these jurisdictions. recent state and local fiscal developments as you know well, the deep recession of 2008 through 2009 and the subsequent slow recovery have battered state and local budgets. as the recession took hold, revenues dropped precipitously, especially at the state level. driven partly by balanced - budget requirements under their constitutions, many governments have responded by cutting numerous programs and reducing workforces. as necessary as these cuts may have been, they have left some jurisdictions struggling to maintain essential services. the fiscal problems of state and local governments have also had national implications, as their spending cuts and tax increases have been a headwind on the economic recovery. moreover, concerns about both the current fiscal condition of these governments and their longer - term commitments to provide pensions and health benefits have recently led to strains in municipal bond markets. the recession ’ s effects on state governments have been substantial. in calendar year 2009, state tax revenues were about 12 percent lower than they had been in 2008 ; declines in wages, salaries, capital gains, and profits reduced income tax revenues, and sales tax collections dropped along with household and business spending. reflecting somewhat better economic conditions, state tax revenues for the first nine months of 2010 were 3 percent higher than during the comparable period a year earlier – a relatively modest improvement in comparison to the earlier decline. meanwhile, on the spending side of the ledger, demand for publicly financed medical care and other public services soared as the economy weakened. most notably, medicaid caseloads rose from less than 43 million at the start of the recession in december 2007 to more than 50 million in june 2010 – an increase of nearly 18 percent. the experience of new york state has not differed greatly from that of