It always seems like your eyes glaze over before you get to the end of the word. But, hyphenate it… Hey! now we’re talking.
Or they were talking – Washington Post blogger Ezra Klein and James Galbraith.
EK: You think the danger posed by the long-term deficit is overstated by most economists and economic commentators.
JG: No, I think the danger is zero. It’s not overstated. It’s completely misstated.
EK: Why?
JG: What is the nature of the danger? The only possible answer is that this larger deficit would cause a rise in the interest rate. Well, if the markets thought that was a serious risk, the rate on 20-year treasury bonds wouldn’t be 4 percent and change now. If the markets thought that the interest rate would be forced up by funding difficulties 10 year from now, it would show up in the 20-year rate. That rate has actually been coming down in the wake of the European crisis.
So there are two possibilities here. One is the theory is wrong. The other is that the market isn’t rational. And if the market isn’t rational, there’s no point in designing policy to accommodate the markets because you can’t accommodate an irrational entity.
You should read it. So much of the conversation about deficits, recessions, taxes and stimulus that goes on is just wrong. It’s a way to punch a hippie, push an agenda, empower corporations, screw the poor or some combination of all of these. You’d have to understand, very deeply, a lot of this stuff to be able to call bullshit on the faux-populist balderdash that gets most of the play most of the time (for instance, the business page in any newspaper taking a sour attitude toward statistics or policy measures that benefit workers). This guy does. Check it.