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What, Me Worry?: Few Expected Green Shoots in the Bond Market

7/12/09 2:33 PM

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What, Me Worry?: Few Expected Green Shoots in the Bond Market Paul Krugman has a chart:

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What, Me Worry?: Few Expected Green Shoots in the Bond Market

7/12/09 2:33 PM

and writes: Bond panic subsiding?: Over the course of the spring there was a substantial rise in long-term interest rates; it was fed partly by talk of green shoots, but also, I suspect, by all the yelling about deficits and inflation. And, of course, the rise in rates was itself taken as evidence that inflation fears etc. were justified. But the panic seems to be subsiding. Rates are still well above their post-Lehman lows, when credit markets were completely frozen and everyone was piling into govt. debt. But they’re low by historical standards, and not giving much ammunition to the worriers these days. On the contrary, they are giving a significant amount of ammunition to the worriers--my brand of worriers, a different kind of worriers. We worry that the next two years are going to bring what happened after the end of the 2001 recession: something like this:

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What, Me Worry?: Few Expected Green Shoots in the Bond Market

7/12/09 2:33 PM

A recovery in which unemployment is higher two years later than when the recovery began is not much of a recovery. And I don't see what is going to keep the probability of such an eventuality low. The lower are ten-year Treasury interest rates, the more are people trading in the bond market willing to bet their money that the future holds that kind of non-recovery recovery. And so I worry. RECOMMENDED (4.51) by 4 people like you [How? ] You might like:

Chinese Deflation Picks Up Steam; Recovery a Mirage (@Mish's Global Economic Trend Analysis) Words from the (investment) wise for the week that was (June 15 – 21, 2009) (@Investment Postcards from Cape Town) 2 more recommended posts  Brad DeLong on July 08, 2009 at 06:35 PM in Economics, Economics: Federal Reserve, Economics: Finance, Economics: Macro | Permalink TrackBack TrackBack URL for this entry: Listed below are links to weblogs that reference What, Me Worry?: Few Expected Green Shoots in the Bond Market:

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What, Me Worry?: Few Expected Green Shoots in the Bond Market

7/12/09 2:33 PM

It is time to recognize that our economy is transitioning and it will take a while for the next economy that will create new jobs to kick in. In the meantime, the government needs a domestic jobs creation program to pick up the slack in employment, NOT more untargeted "leaky" stimulus. The excess capital that has been sloshing around creating bubbles needs to be collected as revenue and plowed into productive investments. Posted by: bakho | July 08, 2009 at 07:14 PM Brad DeLong, someday you will get a really snazola graphing program, and then, for sure, I would really like to see your graphs. Posted by: Nancy Kirsch | July 09, 2009 at 12:39 PM Despite the low inflation forecasts apparent in the bond market and the strong dollar, Ben Bernanke apparently realizes that the real threat is not the half-million jobs lost each month, no the 'real' threat is the massive inflation and devalued dollar threat lurking just 'round the corner... Fortunately, we've got Ben Bernanke, inflation-warrior extraordinaire on the case to save western civilization... Posted by: Thorstein Veblen | July 09, 2009 at 06:51 PM

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Economists: Paul Krugman Mark Thoma Cowen and Tabarrok Chinn and Hamilton Brad Setser

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What, Me Worry