More on the Bond Market
“But the argument has become even stranger recently, as it has become clear that investors arenâ€™t worried about deficits; theyâ€™re worried about stagnation and deflation. And theyâ€™ve been signaling that concern by driving interest rates on the debt of major economies lower, not higher. On Thursday, the rate on 10-year U.S. bonds was only 2.58 percent.
So how do austerians deal with the reality of interest rates that are plunging, not soaring? The latest fashion is to declare that thereâ€™s a bubble in the bond market: investors arenâ€™t really concerned about economic weakness; theyâ€™re just getting carried away. Itâ€™s hard to convey the sheer audacity of this argument: first we were told that we must ignore economic fundamentals and instead obey the dictates of financial markets; now weâ€™re being told to ignore what those markets are actually saying because theyâ€™re confused.”