Neil Irwin:
There is no fiscal crisis. What that means for the U.S.: Here are two numbers to know about the United States and Japan: 1.79 percent and 0.77 percent. Those are the yields on 10-year bonds in those two nations as of Thursday morning, the price their governments must pay to borrow money for a decade. In other words, investors are willing to fling their savings at those two seemingly dysfunctional governments for next to nothing…. Name a country with… a stable political system, a central bank to call its own, and a free flow of capital across its borders… and it has, right now, extraordinarily low interest rates…. [A]round the world there are all sorts of savers--pension funds, wealthy individuals in emerging nations, governments that want to ensure they have reserves put aside in case there were to be a run on their currency--for whom the goal is not so much to get a big yield on their savings, but rather to ensure that they will get their money back when they need it…. There are three points to draw from that.
One is that as the United States looks to reduce budget deficits, it should do so on its own terms…. Second, if there are things we can do with the cheap money the world is flinging at us that would make the U.S. economy more competitive in the longer run, we should take advantage…. The third point… is… there is an unfortunate tendency to treat the size of budget deficits and the level of inflation or unemployment in moral terms. Surely when a nation sins through fiscal irresponsibility and tempts the devil inflation, it ought to receive the wrath of a vengeful god. But that's not how it is. Macroeconomics is not a morality play…
