Monday, June 24, 2013

CONFESSION: Krugman and I were both wrong about the Fed and interest rates

Tyler Cowen writes in a post titled: Krugman and I were both wrong about the Fed and interest rates:
In 2011 Krugman wrote (and here)
Like Bernanke, I don’t believe that the flow of Fed purchases has been an important factor holding bond rates down, and hence don’t believe that they will jump when the purchases end.
I don’t think I ever wrote this view up, but I was of the same opinion nonetheless.  It no longer seems this is true.
Kudos to Tyler for recognizing his error, but it is baffling that he made it. Did/does he really believe that the Fed's massive intervention in the bond market did not have an impact on interest rates?

3 comments:

  1. I find this totally incomprehensible. One can almost understand Krugman making this error. Almost. But Tyler? I just don't get it. How could mssive bond buying by the Fed NOT have a depressing effect on yields??

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  2. Good for Tyler. He earned respect points. As for Krugman, he's just a political operative anyway. I call him the "pied piper of debt and destruction".

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  3. The Fed has not stopped purchasing so it's a little early to call Krugman wrong. Interest rates went up for a few days last week but are down today.



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