Interest rates
Don't believe the hype.
It's certainly possible that at some point the Chinese could stop buying U.S. debt and, therefore, drive up interest rates. But every time I ask the question of true experts in the field (as opposed to inside-the-Beltway types who are interested in scoring political points), I get an answer that makes far more sense and is based on facts rather than fear-mongering.
Chuck Lieberman, who as I've said before is one of the economists whose words I always consider carefully, has an easy-to-read take on this issue that is worth a few minutes of your time.
If you don't have time to read the whole thing, here's the money quote:
Here's my column from today's Roll Call.
Let He Who Is Without National Debt Sin Cast the First Stone
A small part of me is glad that bond market vigilantes are focused on the federal budget, the deficit and the national debt. Not caring about the amount that the government is borrowing would make bond traders far too much like the mortgage market that was willing to look the other way as no-doc, ninja (no income, no job or assets) and payment-option adjustable rate mortgage loans helped lead to the economic problems that we’re suffering through today.
But most of the bond market’s concerns are remarkably misplaced or misstated, and they are clearly being hyped for political purposes. Those in Washington, D.C., who are using these concerns to attract attention are not just incorrect but almost laughably wrong. They are also at least partly to blame for what they are now so willing to blame on others.
Here's my column from today's Roll Call.
The Bond Market Vigilantes Need To Chill Out
I've had the privilege of knowning and learning from Chuck Lieberman for a long time. How long? When I first met him back in the 1980s he was chief economist for Manufacturers Hanover. I was having lunch with him on October 20, 1987, when the Dow dropped 508 points.
Very simply, when Chuck talks about interest rates -- I listen. Which is why I'm passing along this brief article that he published yesterday. Chuck's take is that the handwringing that has taken place over the past few weeks about inflation and rising rates is grossly misplaced. The money quote:
"Near term, inflation is still more likely to slow down."
Take the time to read the whole article. It's short and well worth your time.
