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Krugman: Does Obama Believes in the invisible Bond Vigilantes?
My version of the headline featuring a question mark is a little Obama-friendlier than Krugman's, but I think it's fair.
Guess Who Still Believes in Invisible Vigilantes
Lots of chatter about the WSJ’s account of how the deficit negotiations broke down, although — a few fun quotes aside — most of it is what we already pretty much knew. But here’s a passage that bothered me:
Oh, dear — does the president still believe that failure to reach a Grand Bargain will cause an attack by the invisible bond vigilantes, and that this is the reason we should fear the fiscal cliff? How many times do we have to show that this notion is wrong both in theory and empirically? America can’t run out of cash (except politically, if Congress refuses to raise the debt ceiling); it basically can’t experience an interest rate spike unless people see an increased chance of economic recovery and hence a rise in short-term rates. And the people who have been predicting an interest rate spike any day now for four years shouldn’t have any credibility at this point.
Oh yeah, and a global recession would surely mean lower, not higher, interest rates. If Obama is still confused about this, it has real-world consequences — in particular, it makes him too eager to reach a deal now now now, and hence too willing to concede on fundamental priorities.
Now, this wasn’t a direct quote, and we can hope that whoever was talking to the WSJ got it a bit wrong. But not what I wanted to hear about administration thinking at this point.
http://krugman.blogs.nytimes.com/2012/12/22/guess-who-still-believes-in-invisible-vigilantes/
Lots of chatter about the WSJ’s account of how the deficit negotiations broke down, although — a few fun quotes aside — most of it is what we already pretty much knew. But here’s a passage that bothered me:
On Dec. 13, Mr. Boehner went to the White House at the president’s request, joking he was going to the woodshed.
The president told him he could choose one of two doors. The first represented a big deal. If Mr. Boehner chose it, the president said, the country and financial markets would cheer. Door No. 2 represented a spike in interest rates and a global recession.
Oh, dear — does the president still believe that failure to reach a Grand Bargain will cause an attack by the invisible bond vigilantes, and that this is the reason we should fear the fiscal cliff? How many times do we have to show that this notion is wrong both in theory and empirically? America can’t run out of cash (except politically, if Congress refuses to raise the debt ceiling); it basically can’t experience an interest rate spike unless people see an increased chance of economic recovery and hence a rise in short-term rates. And the people who have been predicting an interest rate spike any day now for four years shouldn’t have any credibility at this point.
Oh yeah, and a global recession would surely mean lower, not higher, interest rates. If Obama is still confused about this, it has real-world consequences — in particular, it makes him too eager to reach a deal now now now, and hence too willing to concede on fundamental priorities.
Now, this wasn’t a direct quote, and we can hope that whoever was talking to the WSJ got it a bit wrong. But not what I wanted to hear about administration thinking at this point.
http://krugman.blogs.nytimes.com/2012/12/22/guess-who-still-believes-in-invisible-vigilantes/
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