Home > Uncategorized > Krugman can’t remember what he wrote yesterday

Krugman can’t remember what he wrote yesterday

Krugman wrote yesterday that deflation was everywhere, that “market” bond yields indicated that deflation was everywhere and that govts should spend their way to oblivion because bond yields were telling them there was no risk in increasing public debt.

Today, he’s shocked at EU govt bond yields, whining over the fact that Portugal is in big trouble.  He doesn’t comment on how Portugal arrived at this spot.  He doesn’t comment on whether his advice caused this crisis.  He merely rants that interest rates are “too high”.

He fails to connect up the two thoughts in his head.  He is a madman, no question.

I’m with Calculated Risk here: it says something about the sheer desperation of the European situation that Portugal’s ability to sell 10-year bonds at an interest rate of “only” 6.7 percent is considered a success. If you think about the debt dynamics here — the burden of growing interest payments on an economy that is likely to face years of grinding debt deflation — an interest rate that high is little short of ruinous. But it is, indeed, not as bad as people were expecting last week; hence, success.

A few more successes and the European periphery will be destroyed.

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