Ep. 43 Krugman Says Investors Have Given Up Hope…So, What Happened to that Obama Recovery, Paul?

16 July 2016     |     Tom Woods     |     4

This week, Krugman considers several possible explanations for why long-term interest rates are so low around the world. The one he settles on: investors have concluded that the weak economy is the new normal, so to speak, so they’re willing to accept low yields. But this explanation contradicts Krugman’s repeated insistence that the Obama recovery is stronger than ignorant right-wingers give it credit for. Which is it, Paul?

Krugman Column

Trump, Trade and Workers” (July 11, 2016)

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Contra Column

Stop Bleating About Crumbling Infrastructure,” by David Stockman

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  • redacted

    I think it’s important to stress where interest rates come from. From the austrian perspective they come from the supply of savings and the demand for those savings, in the form of loans. By substituting inflation for savings you do not create more savings, but the illusion that there are more savings is created which manifests itself through comparatively low interest rates. Comparatively lower interest rates incentivizes borrowing and disincentivizes saving. Many of the projects that will now be engaged in will fail because of a lack of genuine savings.

  • oblivionpool

    What stuck out to me on the yield spread argument is that one would likely be able to attribute some of a tighter spread to the high demand ‘reach for yield’ lowering the cost for the issuers. When treasuries yield zero… have to go lower on the capital stack in the face of higher risk… especially for anyone managing an unfunded pension obligation or any number of investors looking for more bang for their buck over the last 6 years.

  • S.N. Ebbert

    Tom the microphone adsorbs your voice, for us the sound isn’t that bad.

  • jacobthestupendous

    If you’re worried about future remote recording quality due to less-than-ideal surroundings, something like this could be a real help: