What IS the Nature of the Danger?

Via Crooks & Liars, Ezra Klein interviews economist James Galbraith (Washington Post online):

EK: You think the danger posed by the long-term deficit is overstated by most economists and economic commentators.

JG: No, I think the danger is zero. It's not overstated. It's completely misstated.

EK: Why?

JG: What is the nature of the danger? The only possible answer is that this larger deficit would cause a rise in the interest rate. Well, if the markets thought that was a serious risk, the rate on 20-year treasury bonds wouldn't be 4 percent and change now. If the markets thought that the interest rate would be forced up by funding difficulties 10 year from now, it would show up in the 20-year rate. That rate has actually been coming down in the wake of the European crisis. [emphasis by Bob]

So there are two possibilities here. One is the theory is wrong. The other is that the market isn't rational. And if the market isn't rational, there's no point in designing policy to accommodate the markets because you can't accommodate an irrational entity.

Hmmmm, does that mean all the "Reduce The Deficit NOW!!" cries are simply a magician's flourish to distract from what the other hand is doing????

C&L has a video that goes along with this also, of another interview (link above)

Still Unclear As To What Happened To The Economy?

Michael Rushkoff explains it brilliantly:

With any luck, the economy will never recover. In a perfect world, the stock market would decline another 70 or 80 percent along with the shuttering of about that fraction of our nation’s banks. Yes, unemployment would rise as hundreds of thousands of formerly well-paid brokers and bankers lost their jobs; but at least they would no longer be extracting wealth at our expense. They would need to be fed, but that would be a lot cheaper than keeping them in the luxurious conditions they’re enjoying now. Even Bernie Madoff costs us less in jail than he does on Park Avenue. Alas, I’m not being sarcastic. If you had spent the last decade, as I have, reviewing the way a centralized economic plan ravaged the real world over the past 500 years, you would appreciate the current financial meltdown for what it is: a comeuppance. This is the sound of the other shoe dropping; it’s what happens when the chickens come home to roost; it’s justice, equilibrium reasserting itself, and ultimately a good thing. (emphasis original)

(h/t to Blue Gal)

Remember This

The US House of Representatives passed the Stimulus Bill, once again, with no Republican votes. John Boehner cried again about how it was "turned into a bill that's about spending, spending, spending."

As President Obama said last week, "Just what do you think a stimulus is?"

Just how far will the Republicans marginalize themselves?