Krugman’s blog, 6/15/16

There was one post yesterday, “Bondage Fantasies at the WSJ:”

Back in early 2009 the Wall Street Journal looked at a blip in interest rates — which was obviously, even at the time, driven by optimism about economic recovery, which unfortunately proved misplaced — and declared that the bond vigilantes were back. Rising rates, the paper declared, were a sign that all-wise markets feared budget deficits and inflation. Soaring rates were proof that government was the problem.

Seven years on, the inflation never materialized, and interest rates all around the advanced world are at historic lows, with German 10-years having just gone negative. So the Journal has apologized for getting it all wrong, right? Hahahahaha.

Instead, we now have an editorial denouncing “money for nothing“, These low rates are not a sign that governments should build infrastructure, or that inflation is too low. They “reflect a lack of confidence in options for private investment.”

So rising rates show that government is the problem, and falling rates also show that government is the problem.

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One Response to “Krugman’s blog, 6/15/16”

  1. Russian Sage Says:

    The WSJ explains how this crippling effect became the new normal in Europe during the Bush era recession starting in 2008. If that is correct than the negative rates in reality are the banks obligations for the monies borrowed to stave off failure. QE injected money but it must also get repaid does it not? So negative rates appear to be a collection notice. Thus the bad rap that negative rates are in fact taxes on banks is a smoke screen. Perhaps I am being too negative?

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