With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits….
How will the train wreck play itself out? Maybe a future administration will use butterfly ballots to disenfranchise retirees, making it possible to slash Social Security and Medicare. Or maybe a repentant Rush Limbaugh will lead the drive to raise taxes on the rich. But my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.
And as that temptation becomes obvious, interest rates will soar. It won’t happen right away. With the economy stalling and the stock market plunging, short-term rates are probably headed down, not up, in the next few months, and mortgage rates may not have hit bottom yet. But unless we slide into Japanese-style deflation, there are much higher interest rates in our future.
I think that the main thing keeping long-term interest rates low right now is cognitive dissonance. Even though the business community is starting to get scared — the ultra-establishment Committee for Economic Development now warns that ”a fiscal crisis threatens our future standard of living” — investors still can’t believe that the leaders of the United States are acting like the rulers of a banana republic. But I’ve done the math, and reached my own conclusions — and I’ve locked in my rate.
— Paul Krugman, “A Fiscal Train Wreck,” the New York Times, March 11, 2003, as spotted by a Hot Air reader in the comments thread to a new post by Ed Morrissey titled, “Scarborough on Krugman: ‘self-consumed professor’ with a ‘daily … ideological Vaudeville act.'” And note this comment from Ed himself:
As far as Krugman being welcome back to Morning Joe, it’s kind of Joe to say, but … this doesn’t seem to be a very good way to treat a guest. I’m no fan of Paul Krugman, but writing an insult-filled op-ed in another prominent forum about someone after they’ve left the set doesn’t seem like good form to me. This is something Joe could have said to Krugman on set, where Krugman could have answered him in real time. Joe owes Paul an apology.
In case he ever loses his gig at MSNBC, perhaps Scarborough is simply attempting to ingratiate himself with the producers at CNN.