{"id":5294,"date":"2012-07-18T15:54:37","date_gmt":"2012-07-18T19:54:37","guid":{"rendered":"http:\/\/www.multiplier-effect.org\/?p=5294"},"modified":"2012-07-18T16:10:11","modified_gmt":"2012-07-18T20:10:11","slug":"what-to-say-about-the-low-yields","status":"publish","type":"post","link":"https:\/\/blogs.bard.edu\/multiplier-effect\/what-to-say-about-the-low-yields\/","title":{"rendered":"What to Say About the Low Yields?"},"content":{"rendered":"

Correlation is not causation, of course, but I’m beginning to suspect that there might be some operational relationship between the frequency with which you hear people complaining about the crippling burden of government debt, and a fall in the cost of government borrowing.<\/p>\n

Last week the Financial Times<\/em> reported<\/a> that investors had accepted “the lowest yields ever for 10-year paper in a US Treasury auction.”\u00a0 Right on schedule, the Washington Post<\/em> announced<\/a> yesterday that a shiny new campaign, organized by former politicians and business leaders, has been put together to tackle the clear and present dangers of government debt, advocating “a far-reaching plan to raise taxes, cut popular retirement programs and tame the national debt.”<\/p>\n

To be fair, it seems there is always<\/em> a new campaign being announced for taming the national debt (this particular initiative features some plucky newcomers named Erskine Bowles and Alan Simpson).\u00a0 But there are problems<\/a> with the projections underlying these arguments about the long-term unsustainability of federal debt.\u00a0 And in the short run, it’s becoming increasingly difficult to understand what problem is supposed to be solved by decreasing government borrowing.<\/p>\n

Thankfully, the conventional wisdom is beginning to solidify around the belief that we need to avoid the “fiscal cliff,\u201d but this justified fear of the huge fiscal contraction scheduled for 2013 has so far not translated into equal concern for the smaller-scale budget austerity<\/a> we’re already imposing (or for what would seem like a logical extension of that fear of fiscal contraction:\u00a0 namely, a push for expansionary fiscal policy).<\/p>\n

With negative real interest rates being “paid” on 10-year government debt, one runs out of ways of explaining how foolish it is that, for example, spending by state and local governments on public infrastructure is at its lowest levels<\/a> in seven years.\u00a0 We’ve covered the sarcastic approach in the first sentence, so let’s set the question up in as dull and uncontroversial a manner as possible:<\/em><\/strong><\/p>\n