Home / General / But…the Confidence Fairy! The Bond Vigilantes!

But…the Confidence Fairy! The Bond Vigilantes!


Apparently, people who have an actual direct financial stake in the question aren’t impressed with Hoovernomics.

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  • calling all toasters

    Obama’s takeaway: “We didn’t go far enough to reassure the markets! Time for the Ryan plan!”

  • I imagine the real problem here is Europe teetering on the brink of disaster, not the debt ceiling deal.

    • howard

      in the sense that it’s not reaching a deal on the debt ceiling, yes, but in the sense of what markets are reacting to, it’s: the likely collapse of the eurozone; the contractionary impact of the deficit deal on top of the already weakening economy as stimulus funds cease to exist; and most important of all, the recognition in the markets that the gop has exposed a structural flaw in the us government that has been ready to happen ever since the civil rights movement led to the parties achieving greater ideological coherence (more so on the gop side than the democratic side, of course), meaning that the government of the state of california is now a good indicator of the future of the american government in general.

      or, to put it a much simpler way: there are no sources of growth, and every possible source of growth has been shut down.

      • Incontinentia Buttocks

        Though there are certainly structural problems with the US government, they are significantly less severe that this recent crisis suggests.

        Take the dysfunction of the Senate, for example. Now some of it flows from equal representation of the states in the Senate, which is indeed a structural problem.

        But the filibuster rule can be changed by a simple majority of that body, which makes it rather unlike the peculiarities of the California constitution.

        In short, much of the Senate’s dysfuntionality flows from the Democratic Majority’s wanting the Senate to be dysfunctional.

        • jeer9

          Oops. Noticing intention again. Be careful.

  • You have a vivid imagination.

  • c u n d gulag

    David Frum, yesterday – it’s a great comment from him:

    “Imagine, if you will, someone who read only the Wall Street Journal editorial page between 2000 and 2011, and someone in the same period who read only the collected columns of Paul Krugman. Which reader would have been better informed about the realities of the current economic crisis? The answer, I think, should give us pause. Can it be that our enemies were right?”


    We’ve been trying to tell you we’ve been right for over 30 years now.
    I’ll give Frum credit – it takes a real mensch to admit you’re wrong.

    • You should have gone back a paragraph or two to post why he comes to this conclusion:

      Think of Susan Sontag as you absorb the horrifying revised estimates of the collapse of 2008 from the Commerce Department. Two years ago, Commerce estimated the decline of the US economy at -0.5% in the third quarter of 2008 and -3.8% in the fourth quarter. It now puts the damage at -3.7% and -8.9%: Great Depression territory. Those estimates make intuitive sense as we assess the real-world effect of the crisis: the jobs lost, the homes foreclosed, the retirements shattered. When people tell me that I’ve changed my mind too much about too many things over the past four years, I can only point to the devastation wrought by this crisis and wonder: How closed must your thinking be if it isn’t affected by a disaster of such magnitude?… The ground they and I used to occupy stands increasingly empty.

      • c u n d gulag

        Oh I did – that’s why I included the link!

    • Incontinentia Buttocks

      On the other hand, in 2000, there was a major political party that arguably agreed with Krugman.

      Now both major political parties agree with the WSJ.

  • Joshua

    So… we’re totally fucked now, right?

    • shah8

      Yes, yes we are…

      And yes, Obama’s policies wrt to deliberately wasteful displays of fiscal rectitude had everything to do with reassuring bond markets (or at least be the last to be attacked). We’ve enjoyed lower interest rates as a result. Of course, the government isn’t actually being allowed to do non wasteful acts of fiscal restructuring–such as restraint of health/defense costs, and is blantantly showing that they can’t be counted on. Oh hell yes we’re fucked fucked fucked…

  • DrDick

    The irony here of course is that it was Wall Street and the financial press who were among the biggest proponents of the “EEEK! Deficits are going to kill everybody” hysteria. Now that they got what they wanted, suddenly they are having buyer’s remorse.

    • NonyNony

      Who says they are?

      Down markets don’t mean that Wall Street and the financial press are unhappy – if they sold out when the market was high and are preparing to buy cheap when the market hits bottom they may be exceedingly happy.

      The non Wall Street corporations are probably unhappy, but since they have completely given up the mantle of “business” over to the bankers and the financial engineers on Wall Street they have only themselves to blame.

      • mpowell

        They also don’t have an f*ing clue while the bankers actually do have some idea of what deficits, unemployment and interest rates mean.

      • This.

        The smart money’s in Swiss francs and Japanese yen now, waiting for the market to bottom out.

        • Japanese Yen? Srsly? It’ll hold value as long as the Japanese are repatriating profits, but their growth prospects are even worse than the US for the foreseeable future.

          • But they also aren’t on the verge of bankruptcy.

      • timb

        good point. Smart Republican bankers knew where this was going a long time ago and probably had short positions on the the entire manufacturing base. They will be cleaning up on those

      • DrDick

        There is also the question of how many people, like Eric Cantor had shorted Treasuries.

        • snarkout

          Shorting Treasuries would have been disastrous, as interest rates creep ever lower against the spectrum of a double-dip recession and deflationary pressure. It’s the inflation monster under the bed.

    • Joshua

      It’s probably a good idea to cash out now, since everyone knows:

      1. Despite what pundits and politicians have been saying, the deficit is not keeping anyone from hiring anyone.

      2. We are guaranteed another 6+ months of deficit hysteria, followed by a Presidential election which will likely rank amongst this country’s most insane.

      3. Europe’s falling apart.

      Things look immeasurably worse than they did even a few months ago. Everything looks down, all the indicators look terrible. The only stores doing alright are the ones you see on Fifth Avenue.

      This sounds more like disaster capitalism than buyer’s remorse, to be honest.

      • Njorl

        I’d recommend moving out of stocks and putting your money into commodities … like freeze dried food, water purification tablets and ammunition.

        Seriously though, our policies make sense if viewed from the standpoint that protecting the value of dollar-denominated assets is the only important thing in the world.

        • Malaclypse

          Seriously though, our policies make sense if viewed from the standpoint that protecting the value of dollar-denominated assets is the only important thing in the world.

          I will point out that housing is the largest dollar-denominated asset. We did not manage to protect the value of that very well…

          • Njorl

            Sorry, I meant dollar equivalent. Assets that don’t generally appreciate with inflation – money, debt etc.

            • Malaclypse

              Ah, okay. That makes sense then.

    • Walt

      I don’t think this is an actual irony. The financial press is a carnival sideshow. Listening to them on market moves is like listening to the fortune-teller to actually tell your future.

      • DrDick

        It is not just the media though. I watch the Nightly Business Report on PBS and all their guest commentators from Wall Street were doing that as well.

      • Stag Party Palin

        like listening to the fortune-teller to actually tell your future.

        Except that Wall Street’s real talent is to predict the past. Now that the market is down 500 they can tell us why. It would have been good to know this yesterday.

  • efgoldman

    Dow plunges more than 400 points; All three indexes are down more than 8% since mid-July.

    One has to wonder whether the TeaTards have portfolios. For sure the C of C GOBP do!


    • One has to wonder whether the TeaTards have portfolios

      Of course they has portfolios! They even has whole folios! Whatcha think they trim on the weekends with hedge clippers?

    • Njorl

      You must remember that the Republicans are no longer the party of big business. They are the party of wealth. While the two often go hand in hand, where their interests differ, business must suffer.

      • Incontinentia Buttocks

        You must remember that the Republicans are no longer the party of big business. They are the a party of wealth.


  • Njorl

    I used to be a deficit addict.
    Now I’m a confidence addict.

  • Karate Bearfighter

    Treasuries and the bond market are up generally. As near as I can tell, the Lehman Aggregate Bond is the gold standard for evaluating the desirability of treasuries; it’s up around 2.5% over the past few days. Pretty clearly, US treasuries became a much more attractive investment as soon as the debt ceiling deal was reached.

    This is not to say that a 4% drop in the Dow in one day isn’t serious, but the Dow isn’t everything, and it seems like a Very Bad Day on Wall Street was guaranteed once investment banks and institutional investors started re-balancing their portfolios towards bonds.

    • Ken

      Should I worry that something with a negative real rate of return is now viewed as an attractive investment?

      • Karate Bearfighter

        Probably; the question is, “how much?” If six months of Republicans threatening to allow the country to default created an artificially low demand for bonds, a sudden rush to bonds may reflect both pessimism about the economy and a market correction.

        • Ken

          Yes, but Treasuries have been in negative rate-of-return territory for quite some time now. More generally, look at how many companies have been sitting on large piles of cash for the last couple of years; and at how much of that cash they’ve been parking in Treasuries. How do you read that, other than that the market can’t find any better investment?

  • pj

    Krugman says maybe somebody should do something. Problem is, the geniuses are baffled.

  • jon

    Figures you’d focus on one tiny little flaw.

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