Ankkuri on katsojan silmässä

Yhdessä Krugmanin henkilökuvassa oli tämä helmi:

I brought up the work of the legal scholar Cass Sunstein, now with the Obama administration, who has studied the radicalizing effects of ideological isolation—the idea, born from studies of three-judge panels, that if you are not in regular conversation with people who differ from you, you can become far more extreme. It is a very Obama idea, and I asked Krugman if he ever worried that he might succumb to that tendency. “It could happen,” he says. “But I work a lot from data; that’s enough of an anchor. I have a good sense when a claim has gone too far."

Sitten kun lukee jotain tällaista

"Thanks to inflation-protected securities, we can look at real rates directly",

tulee mieleen monta asiaa. Tulee mieleen, että joskus on vaikeaa olla keksimättä jotain nokkelan ikävää. Tulee mieleen, että montako minuuttia kestää löytää sitaatti, jossa sama tyyppi sanoo, että ei reaalikorkoa näe vain katsomalla TIPS-yieldiä suoraan tai että ei inflaatio-odotuksia näe vain katsomalla TIPS-spredia suoraan. Tulee mieleen, että mitäköhän ne TIPS-markkinat ovat silloin viestineet. Tulee mieleen, että onkohan sillä mitään väliä, pitääkö olla niin tarkka, hänhän on tätä nykyä populaari kirjoittaja ja oikeastaanhan se on hänen vaimonsa syytä jos tuollaisia tulee. Mutta tätä viimeistä miettiessä sitä on jo ehtinyt etsiä ne sitaatit ja sama ne on sitten laittaa:

Hmm. There have been a number of stories recently saying that inflation expectations are on the rise, and it’s true that the TIPS spread — the difference in yields between inflation-protected US bonds and ordinary, nominal bonds — has widened out to a bit more than 2 percent:

What’s a little puzzling, though, is how that spread has widened. The scare stories run like this: federal borrowing is crowding out private borrowing and/or raising doubts about US solvency; as a result real borrowing costs are up and nominal borrowing costs up even more, for fear that Uncle Ben will inflate away Uncle Sam’s debts.

But what’s actually happening is that the nominal bond yield is about what it was in early September, while the real bond yield has fallen.

I’m not at all sure what this means. One possible story would be that the liquidity discount on TIPS has fallen, as markets grow calmer; in that case inflation expectations have nothing to do with it. Another is that expectations about the real economy have weakened, driving down real rates, but this has also raised expectations of an inflationary policy, so that nominal rates have risen. I’m sure that there are more tales to tell.

Anyway, there’s a puzzle here; it’s not the simplistic WE’RE ALL GONNA DIE GO BANKRUPT story some would have you believe.

tai

Treasury inflation-protected securities — bonds whose payouts are indexed to consumer prices — are really useful for economic analysis: they give an objective, market-based measure of expected inflation. But you have to be a bit careful about using them to interpret recent events, because the same financial disruptions that wreaked havoc with many assets also did some funny stuff to TIPS.

You can see what I mean in the chart above. The yield on TIPS shot up after Lehman fell; ordinary bond yields plunged over the same period. Was this a collapse in expected inflation? Not really, or at any rate not mostly: TIPS are less liquid than regular 10-year bonds, so in the rush for liquidity they became very underpriced for a while. Correspondingly, as markets calmed down there was a fall in TIPS yields and a rise in ordinary bond yields; this probably didn’t have much to do with changing inflation expectations.

So when you read something like this:

Market inflation expectations can be calculated by comparing the difference in yields on a 10-year Treasury and a 10-year Tip. In the US, that gauge has reached the highest level in 15 months. A comparison of similar UK bonds shows expectations are at an 11-month high.

This rise has led to talk of a return of “bond vigilantes”, investors who in the past have pushed up long-term bond yields on fears of inflation and forced central bankers to tighten policies.

you have to take it with large helpings of salt.