Via the fabulous blog of Berkeley’s Brad DeLong, is this observation:
If this isn’t a market prediction of a double-dip and a lost decade (or more), I don’t know what would be. At least Hoover was undertaking interventions in financial markets–and not just blathering about how cutting spending was the way to call the Confidence Fairy…
So, do conservatives believe in markets? Or don’t they? Because the bond market — which the Wall Street Journal has long praised as being omniscient — is saying to us and to Europe:
Wrong turn guys. Go back. Rethink. Don’t do fiscal contraction now. We’re expecting deflation, not inflation. We’ll gladly give you long-term money for free. We’ll pay you interest if you will take it. Please take our money. Please spend like hell. There is no other actor except sovereign governments who can make up the shortfall in aggregate demand. Spend governments. Spend now. Now.