bond market

My column from this morning's Roll Call asks two very troubling questions: 

1. Why are some people refusing to hear what the bond market is saying?

2. How is it possible that so many of those who insist the bond market should be ignored now were saying just the opposite before?

Having It Both Ways on the Bond Market’s Message

Sept. 7, 2010

My Aug. 3 column about the former “bond market vigilantes” now being obvious federal budget deficit cheerleaders generated a great deal of attention and lots of pro and con comments.

My column from this morning's Roll Call is about Wall Street's clearly changing opinion about the federal deficit and national debt.  I wonder why CNBC hasn't discussed this yet.

Bond Vigilantes Are Now Deficit Cheerleaders

Aug. 3, 2010


The story is that the bond market forced President Bill Clinton to change his budget plans. Bob Rubin, director of the newly created National Economic Council, supposedly convinced Clinton that those who buy and sell Treasury securities on Wall Street would force interest rates much higher and hurt the economy if he didn’t do something about the deficit and federal borrowing.

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