Tyler Cowen observes:
Some simple analytics of government debt: U.S. Treasury yields just plunged, as part of a flight to safety. This is because of Japan and perhaps because of the situation in Bahrain also.
Quick quiz: does this mean our federal government should:
a) spend more money, because there are even fewer bond market vigilantes than before, or
b) spend less money, because there is a general signal that everyone should pull back on excess commitments and risky projects, governments included.
If people thought that government debt was risky, its price would be falling as well. The fact that people are willing to pay more for government debt indicates that it is increasingly valuable--and so we should make more of it.