“What’s the greatest threat to our still-fragile economic recovery? Dangers abound, of course. But what I currently find most ominous is the spread of a destructive idea: the view that now, less than a year into a weak recovery from the worst slump since World War II, is the time for policy makers to stop helping the jobless and start inflicting pain.” The NYT’s Paul Krugman weighs in on the deficit hysteria afflicting Washington right now. Honestly, this is Keynes 101, people — you don’t dial back government spending at a moment of incipient recovery, or else you end up with things like the 1937 Roosevelt Recession.
FWIW, the deficit witchhunt may be rolling in DC, but the bond markets aren’t listening. “On Friday, they were willing to hand over their cash to the Treasury for 10 years for 3.3 percent interest, a level so low it implies they consider the United States among the safest investments in the world.“