The danger posed by the deficit ‘is zero’ (LOL!)
This is comedic. Hubris is funny.
Galbraith: The danger posed by the deficit ‘is zero’
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. [My comment: ... LOL! ]
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. [My comment: Uhhhh.... If the Fed is backstopping all of the long dated Treasury purchases then it would be. i.e. Demand is artificial]. 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.
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. [My comment: LOL! especially if you (the Fed) are making the market and the irrational entity is yourself]
There is more to this trainwreck with lots of Keynesian pseudo-logic and gobbledy-gook (you need your swamp boots about 2 paragraphs down). Feel free to follow if you need more of a laugh, and I needed a good laugh today.