Keynes not considered a Prophet in the land of his birth

Robert Waldmann

Krugman not considered a competent data downloader in the Newspaper which employees him.

Writing about the new slashed budget proposed in the UK, Landon Thomas Jr sees invisible bond vigilantes

” bond market demands to follow through on promised austerity plans.” If this means anything it means that, before the announcement of the austerity bond prices were unusually low and/or falling sharply. In fact, bond prices were extraordinarily high.

“If you look at the real yields available in index linked gilts, even out to 2017 – seven years time – the real yield available on a index linked gilt is close to zero. That is telling you that rates are going to stay very low,” he claims.

“When people are using an historic onset to base where 10 year gilts should be, the zero real yield is a very unusual situation, it would typically be closer to 2.5 per cent. Unless you are willing to say that the real yield is wrong and, as such, argue that the BoE are about to start hiking rates, I don’t think you can say that gilts are inevitably going to give you a poor return.”

Looking ahead, Mr Apel

Most bond traders might be claiming they are worried about the deficit, but, if so, they are lying. The bond market says that the default risk is miniscule.

I propose we take up a collection to buy Mr Thomas a subscription to the New York Times.

bonus link to Peter Dorman Via Mark Thoma