Example of the news sucking: On Monday, after S&P downgraded our debt and the stock market took a dive, I saw stories online with headlines like "stocks plunge after S&P debt downgrade" and other wording implying that one led to the other. Why? Is it just because those are 2 big things everyone knows about, and people would like the simplicity of imagining that the causation worked that way?
This week stocks have plunged, but U.S. debt has sold better than ever. Today we broke the record for lowest interest rate on 10-year treasury notes. If the events of this week were due to investors' concerns over U.S. debt, the interest on our debt would have gone up, much less down to record lows. If investors are selling tons of stocks and buying up tons of U.S. debt, that means that 1) our debt is still considered the safest investment in the world and 2) the economy sucks and will continue to suck.
So on the one hand, our economy is terrible and showing no signs of meaningful improvement under current circumstances. On the other, investors and foreign governments want to lend our government money more cheaply than ever before - well below inflation... they are basically paying us to hold on to their money. Doesn't that suggest that right now is the best time to borrow a bunch of money to pump into our economy and the wrong time to try to balance our budget? Borrowed money for stimulus would only need to have a slightly positive effect in order to pay for itself. We could just hand out tax rebate checks to everyone the way Bush did.
So why is Washington - Republicans and Democrats - currently spending all their time on our long-run budget issues and doing nothing about our economy?
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