"Conservative" Debt Meme, Pfeh

[vel]

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Mainstream Economic Media Cry Wolf

http://www.pbs.org/newshour/businessdesk/2011/11/mainstream-economic-media-cry.html

I've been saying the following to friends and colleagues for months now: In all my many years as a business and economics reporter, I have never seen a greater cognitive dissonance than in the current coverage of the U.S. bond market. Even Chicken Little and the Boy Who Cried Wolf would have by now taken early retirement had their warnings proved as lame as those of the MSEM (mainstream economic media).

"S&P Downgrades!" "Bond Vigilantes Poised to Strike!" "America is Greece!" One-liners meant to catch the eye, freeze the heart. But flat-out irresponsible.

What, briefly, is the fear? Very simple. Investors in U.S. debt, aka U.S. bond holders, aka lenders to the U.S. government, are quaking at the prospect of U.S. debt default. The supposed reason: we can't lower our annual deficit or cumulative debt. So the investors will become "vigilantes" and wreak frontier justice the only way they know how: charging us more in interest to continue lending us money by purchasing our bonds.

This is, infamously, what happened to Greece. When it joined the European Monetary Union a decade or so ago, it borrowed money for 10 years at around 3 percent. Today, as those loans come due, its credibility, and thus its credit, is shot. To borrow money for 10 years, the price for Greece is now above 25 percent. The panic of the moment concerns Italy and Spain, however, both of which are indeed experiencing the wrath of the bond vigilantes, their 10-year interest rates flirting with the 7 percent level, at which point the vicious circle is said to start spinning: higher interest rates feeding higher deficits feeding even higher interest rates feeding even higher deficits...

There is, therefore, a simple way to see if bond investors are losing faith in a country's credit. Look at the interest rates. It's not like they're hard to find. Bloomberg updates them minute-to-minute. On your cellphone. At no cost.

And so now, the simplest of answers to the simplest of questions: how much does the United States have to pay to borrow money for 10 years? On the day the supercommittee throws in the towel? The day the Fitch ratings agency (not the widely discredited S&P) is reported on the verge of a downgrade? The United States will have to pay a king's ransom, right, as the bond vigilantes fasten the noose?

Let's see. Going to bloomberg.com. Clicking on "Markets." Clicking on "Bonds." Clicking on "U.S. Government Bonds." Scrolling down to "10-Year." Here it is: 1.97 percent. Hmmm. The United States has to pay less than two percent to borrow money for 10 years? That's anti-Chicken Little. Not the sky falling, but the interest rate plummeting. Exactly the opposite of all the dire warnings.

Okay, but we need a little context. How far has the rate fallen? Let's go to Yahoo! Finance for a chart. There, on the right, is a blue chart of the 10-year rate over the past year. OMG! It's down from 3.5 percent since about April. April. What happened in April?

Oh, right. S&P downgraded U.S. debt. (See note.) But wait a second. The bond vigilantes should then have forced us to raise our interest rate. Instead, they lowered it?

Okay, maybe April was an anomaly. So click on "5y" under the chart for a view of the rate over the past five years. Can it be? It looks like the 10-year rate is at the lowest point over the entire period! Lower even than in the depths of despair, the post-Lehman crash of late 2008.

One more attempt at context. Go to Bob Shiller's online chart, then open the Excel file to which this links. You'll find a chart of stock prices, in blue, and the 10-year bond rate, in red, reaching back into the nineteenth century. You'll note that today's 1.97 percent is about as low as our interest rate has ever sunk since at least 1880.



And, checking with NYU's celebrated economic historian Richard Sylla, we find that today's rates are astonishingly close to the lowest in the entire history of the United States: 1.85 percent, the nadir reached in late 1941. That was the record, I should say -- until September 22, when the 10-year U.S. interest rate plunged briefly to 1.695 percent.

So what's going on? Well, rather obviously, investors are a lot more worried about the credit of Greece -- or Spain or Italy -- than ours. Investors are also more worried about stock investments. Investors are also more worried about almost any other asset into which they might put their money.

Investors also seem pretty sure that U.S. inflation is not going to be a problem anytime soon. If inflation scared them, they'd hardly let the United States lock in an interest rate of less than 2 percent for an entire decade.

So then why isn't it plausible to draw the following conclusion: that U.S. interest rates have been going in the "wrong" direction because investors are scared that the U.S. is going to reduce its debt and deficits, and such a reduction might horse-collar the world economy?

In other words, might the true story plausibly be a complete contradiction of what is regularly reported? That's what Nobel laureate Paul Krugman of the New York Times has regularly argued, but his "opinion" hasn't managed to leak into everyday coverage.

I don't pretend to know if low U.S. interest rates actually reflect fears of near-term budget-tightening. They may simply reflect fears in general. To quote Republican economist Douglas Holtz-Eakin, America may just be the healthiest horse in the glue factory. But I do know that fear-mongering with regard to the bond vigilantes and Greece finds no support in the data. Yes, in the long run, America will have to modify its promises to retirees or lenders -- with some combination of inflation, benefit changes and, you would think, raised taxes on the wealthy, if not on everyone. But remember John Maynard Keynes' most famous quote: In the long run, we're all dead.

[ivanm]

Mainstream Economic Media Cry Wolf

http://www.pbs.org/newshour/businessdesk/2011/11/mainstream-economic-media-cry.html

I've been saying the following to friends and colleagues for months now: In all my many years as a business and economics reporter, I have never seen a greater cognitive dissonance than in the current coverage of the U.S. bond market. Even Chicken Little and the Boy Who Cried Wolf would have by now taken early retirement had their warnings proved as lame as those of the MSEM (mainstream economic media).

"S&P Downgrades!" "Bond Vigilantes Poised to Strike!" "America is Greece!" One-liners meant to catch the eye, freeze the heart. But flat-out irresponsible.

What, briefly, is the fear? Very simple. Investors in U.S. debt, aka U.S. bond holders, aka lenders to the U.S. government, are quaking at the prospect of U.S. debt default. The supposed reason: we can't lower our annual deficit or cumulative debt. So the investors will become "vigilantes" and wreak frontier justice the only way they know how: charging us more in interest to continue lending us money by purchasing our bonds.

This is, infamously, what happened to Greece. When it joined the European Monetary Union a decade or so ago, it borrowed money for 10 years at around 3 percent. Today, as those loans come due, its credibility, and thus its credit, is shot. To borrow money for 10 years, the price for Greece is now above 25 percent. The panic of the moment concerns Italy and Spain, however, both of which are indeed experiencing the wrath of the bond vigilantes, their 10-year interest rates flirting with the 7 percent level, at which point the vicious circle is said to start spinning: higher interest rates feeding higher deficits feeding even higher interest rates feeding even higher deficits...

There is, therefore, a simple way to see if bond investors are losing faith in a country's credit. Look at the interest rates. It's not like they're hard to find. Bloomberg updates them minute-to-minute. On your cellphone. At no cost.

And so now, the simplest of answers to the simplest of questions: how much does the United States have to pay to borrow money for 10 years? On the day the supercommittee throws in the towel? The day the Fitch ratings agency (not the widely discredited S&P) is reported on the verge of a downgrade? The United States will have to pay a king's ransom, right, as the bond vigilantes fasten the noose?

Let's see. Going to bloomberg.com. Clicking on "Markets." Clicking on "Bonds." Clicking on "U.S. Government Bonds." Scrolling down to "10-Year." Here it is: 1.97 percent. Hmmm. The United States has to pay less than two percent to borrow money for 10 years? That's anti-Chicken Little. Not the sky falling, but the interest rate plummeting. Exactly the opposite of all the dire warnings.

Okay, but we need a little context. How far has the rate fallen? Let's go to Yahoo! Finance for a chart. There, on the right, is a blue chart of the 10-year rate over the past year. OMG! It's down from 3.5 percent since about April. April. What happened in April?

Oh, right. S&P downgraded U.S. debt. (See note.) But wait a second. The bond vigilantes should then have forced us to raise our interest rate. Instead, they lowered it?

Okay, maybe April was an anomaly. So click on "5y" under the chart for a view of the rate over the past five years. Can it be? It looks like the 10-year rate is at the lowest point over the entire period! Lower even than in the depths of despair, the post-Lehman crash of late 2008.

One more attempt at context. Go to Bob Shiller's online chart, then open the Excel file to which this links. You'll find a chart of stock prices, in blue, and the 10-year bond rate, in red, reaching back into the nineteenth century. You'll note that today's 1.97 percent is about as low as our interest rate has ever sunk since at least 1880.



And, checking with NYU's celebrated economic historian Richard Sylla, we find that today's rates are astonishingly close to the lowest in the entire history of the United States: 1.85 percent, the nadir reached in late 1941. That was the record, I should say -- until September 22, when the 10-year U.S. interest rate plunged briefly to 1.695 percent.

So what's going on? Well, rather obviously, investors are a lot more worried about the credit of Greece -- or Spain or Italy -- than ours. Investors are also more worried about stock investments. Investors are also more worried about almost any other asset into which they might put their money.

Investors also seem pretty sure that U.S. inflation is not going to be a problem anytime soon. If inflation scared them, they'd hardly let the United States lock in an interest rate of less than 2 percent for an entire decade.

So then why isn't it plausible to draw the following conclusion: that U.S. interest rates have been going in the "wrong" direction because investors are scared that the U.S. is going to reduce its debt and deficits, and such a reduction might horse-collar the world economy?

In other words, might the true story plausibly be a complete contradiction of what is regularly reported? That's what Nobel laureate Paul Krugman of the New York Times has regularly argued, but his "opinion" hasn't managed to leak into everyday coverage.

I don't pretend to know if low U.S. interest rates actually reflect fears of near-term budget-tightening. They may simply reflect fears in general. To quote Republican economist Douglas Holtz-Eakin, America may just be the healthiest horse in the glue factory. But I do know that fear-mongering with regard to the bond vigilantes and Greece finds no support in the data. Yes, in the long run, America will have to modify its promises to retirees or lenders -- with some combination of inflation, benefit changes and, you would think, raised taxes on the wealthy, if not on everyone. But remember John Maynard Keynes' most famous quote: In the long run, we're all dead.

Hey Einstein, have you watched bond prices for corporates and munis in the last few months? They are headed south dumbass, which tells intelligent people that interest rates are headed back up to cover the increased risk of default.

It is easy for a mouthpiece like you to lip off.  Put some of your money where you mouth is you fucking idiot and you might learn something for a change, the hard way.

And then call your asshole buddy at the FRS to start the presses so we can spend our way out of hock. You are simply unconscious. 

Why don't you quote Marx?  Keynes and Krugman are small fry in comparison to the biggest charlatan that ever foisted misery on millions of unsuspecting people.  Go with the pro dumb ass if you want to be genuine communist.

[vel]

Keynes and Krugman are credible.

You're not.

[ivanm]

Keynes and Krugman are credible.

You're not.

Yeh right, ask the Russians how credible Marx and Trotsky were, and one other snake oil peddler named Engel?

You are a desperate pushover.  Why doesn't your asshole Jew buddies stir up some shit that works for a change?  

This isn't lab 101 jerk, this is the real thing, out where the rubber meets the road.

You come from a long line of losers, Marx, Engels, Trotsky, Keynes, and Krugman, all socialist wannabe communists.  All you need is fertile ground for your gandiose scheme of equality.  Try south Chicago as they are ripe for  the picking, and then trot on over to Detroit, 40 percent of which is simply gone. Losta room for your empty promises there. 

Wow, you could lord it over those useful idiots and tell them how fortunate they are to have you for their mentor.  Doesn't that make you feel big and superior?

[vel]

Yeh right, ask the Russians how credible Marx and Trotsky were, and one other snake oil peddler named Engel?

You are a desperate pushover.  Why doesn't your asshole Jew buddies stir up some shit that works for a change? 

This isn't lab 101 jerk, this is the real thing, out where the rubber meets the road.

You are not the real thing. You are not where the rubber meets the road.

You are nothing. You are nobody. Moreover you're a petty and stupid old man who is way too easy to push over the edge.

Marx and Trotsky have nothing to do with this conversation. You have nothing to do with conversation.

[ivanm]

You are not the real thing. You are not where the rubber meets the road.

You are nothing. You are nobody. Moreover you're a petty and stupid old man who is way too easy to push over the edge.

Marx and Trotsky have nothing to do with this conversation. You have nothing to do with conversation.

They have everything to do with your fucked up sense of  economic reality.  You are so full of yourself that you cannot see it.

Anyone  who thinks our out of control national debt is ok is thoroughly short circuited and in need of rewiring.  Oh I forgot, you and your asshole beanie babies own the FRS, so you are real happy with the interest on the debt coming your way. 

[vel]

They have everything to do with your fucked up sense of  economic reality. 

I have an undergraduate degree in economics and a decent understanding of the subject. Keynes was an absolute genius. Like all people who comment on economics without the benefit of even a rudimentary understanding of the subject, you don't even begin to know what Keynes was about and you really don't even begin to understand Professor Krugman.

You are an absolute idiot who can be easily provoked into throwing around really stupid epithets and racial nonsense. You don't even do a good job of pretending that you actually know something. In other words, closeted gay man Ivan, you are nothing and you are nobody.

Your compulsion to blurt out inappropriate and utterly stupid comments only make you look even dumber than you are. If you want to comment on the subject then educate yourself and say something intelligent. But you won't do that. Of course you won't.

So I'll continue to goad you into making yourself look stupid.

[SufferedMoreThanJesus]

Keynes was an absolute genius.

Once again, that is debatable.  If the standard of being a genius is someone writing a book, Hell yeah!

If the standard is employing what's in that book to any degree, anywhere, at any time...well, then, no.

Keynes is great for people who believe that the way out of debt is to spend your way out of it.  The only entity that would even consider such a thing is an entity that has control of the currency printing presses and has no obligation, other than their own, to pay that debt back.

[vel]

Once again, that is debatable.  If the standard of being a genius is someone writing a book, Hell yeah!

If the standard is employing what's in that book to any degree, anywhere, at any time...well, then, no.

Keynes is great for people who believe that the way out of debt is to spend your way out of it.  The only entity that would even consider such a thing is an entity that has control of the currency printing presses and has no obligation, other than their own, to pay that debt back.

You are just showing your ignorance. Keynes did not "believe that the way out of debt is to spend your way out of it." You're grossly misrepresenting Keynes.

Keynes was an absolute genius and that is a fact. It is not open to debate.

[vel]

I argue that any real understanding of Keynes has to start with his 1926 essay, "The End of Laissez-Faire". I posted it here a year or two ago.

No one here was up to discussing it, which is a pity because it is very relevant and fresh even though it was written 85 years ago. And that is the sign of genius.

[SufferedMoreThanJesus]

You are just showing your ignorance. Keynes did not "believe that the way out of debt is to spend your way out of it." You're grossly misrepresenting Keynes.

I don't necessarily want to keep going in circles on this, but could you identify for me when, where, and how Keynesian Economics has ever been employed?

In history?

[vel]

I don't necessarily want to keep going in circles on this, but could you identify for me when, where, and how Keynesian Economics has ever been employed?

In history?

You're going in circles. We have been through this. You don't understand how it has "been employed" and you're never going to understand it. I'm certainly not going to be able to make you understand it.

If you're really interested in the subject you're going to need to study it.