There was a moment last fall when the Obama administration could have pushed for significantly more aid to the economy, with a reasonable chance of getting something through. But the administration balked — largely, I believe, because it believed warnings that the invisible bond vigilantes were about to strike. And there was a lot of talk at the time about Japan, which was supposedly losing the confidence of investors. As usual, pure speculation was reported as fact:
For jittery investors, Japan’s rising sea of debt is the stuff of nightmares: the possibility of an eventual sovereign debt crisis, where the country would be unable to pay some holders of its bonds, or a destabilizing collapse in the value of the yen.
The only evidence given was a bump up in 10-year bond rates, to a horrifying, um, 1.4 percent. Here’s what has actually happened to those yields since:
Bloomberg Yes, Japanese long-term debt is now yielding less than 1 percent. Oh, and the CDS spread is more or less comparable to other non-Italy G7 countries.
We’re facing a slow-motion catastrophe because policy makers were afraid of the wrong things.