Sunday, November 22, 2009

The Chatter of 'Experts'

Paul Krugman in his NY Times blog nails the idiocy that passes for 'wisdom' in Washington, the handmaiden of Wall Street:
Many people on Wall Street are now warning that there’s a huge bubble in government debt, that interest rates will spike any day now; it’s a warning that clearly has the Obama administration’s ear. A good sample is this piece from Morgan Stanley, according to which “Our US economics team expects bond yields to rise to 5.5% by the end of 2010 - an increase of 220bp that outstrips the 137bp increase in the fed funds rate expected over the same horizon.”

Btw: what? Almost everyone expects unemployment in late 2010 to remain close to 10%. Why, exactly, would the Fed funds rate rise sharply?

Anyway, I was wondering: it’s my impression that the same people now warning about the alleged Treasury bubble dismissed warnings about the housing bubble. Is this true?

I think so. Morgan Stanley, September 2006:
The pessimists argue that the bursting of a putative housing bubble means that prices could decline significantly. There is some risk that prices could decelerate faster or even decline in real terms — after all, investment and speculative activity has picked up in the past five years. But the character of housing demand makes the much-feared decline in prices on a nationwide basis unlikely …
Why Obama would pay attention to this idiotic chatter is mind boggling... except these are his paymasters, and like all employees, he has to pay keen attention to what his bosses want!

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