'Nothing Would Spook the Markets More Than For Paul Krugman's Advice to Be Accepted'

More

Niall Ferguson, the smart but lugubrious Harvard historian who never misses an opportunity to foresee an apocalypse, told Bloomberg TV at the Aspen Ideas Festival that the United States was on an unsustainable path, accumulating debt faster than we can pay for it. Unarguable stuff, that.

Then toward the 3:00 minute mark of the video below, he starts with the doomsday pyrotechnics, bashing Paul Krugman, and predicting that a new stimulus could "trigger" a bond market backlash.



Niall Ferguson is not the bond market, so he shouldn't speak for it with any degree of certainty. By the same token, I am not the bond market, and I won't speak for it with any degree of certainty, either. But let's assume for the moment that the bond market is not incredibly stupid. The stimulus bill voted down last week would have added about 0.3% to this decade's anticipated debt accumulation. Three-tenths of a percent isn't a trigger, it's a rounding error. And with Europe experimenting with economic self-immolation, I don't think the U.S. is in any short term danger of bond traders fleeing to ... um ... where would they even go, again?

The stimulus/extenders bill/jobs bill/family-and-state-relief plan/whatever-we're-calling-it isn't about reducing our long-term structural deficit. It's about trying to get the country back to normal quickly so that it can safely undergo the kind of targeted surgery we'll need to bring down our deficits later. Higher deficits now to cure the patient. Lower deficits later to wean the patient off the strong medication. That's not terribly complicated, and I trust the bond market would understand it if smart people like Niall Ferguson cared more about explaining the facts than using a Bloomberg TV spot to tickle liberals' indignation.

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he oversees the Business Channel. More

Thompson has written for Slate, BusinessWeek, and the Daily Beast. He has also appeared as a guest on radio and television networks, including NPR, the BBC, CNBC, and MSNBC.

Get Today's Top Stories in Your Inbox (preview)

Video

More Video Tales of a 'Roving Typist'


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

An Aggressive Invitation

Highlights from late-night comedy

Writers

Up
Down

More in Business

Just In