Nobel Prize-winning economist Paul Krugman weighs in on the destruction of US bond prices, writing in a post titled:

“Is There a Madness Premium on Interest Rates?”

• “A rise in long-term rates, like the 10-year Treasury, could reflect a terrible, chilling suspicion that Donald Trump actually believes the crazy things he says about economic policy and will act on those beliefs,”

Krugman is a well-known critic of Trump (and vice versa!).

He expressed a concern shared by investors. While there is much uncertainty about what his policy agenda will look like, Krugman suggests that market reactions could be related to Trump’s announcements on tariffs.

He also highlights Trump’s controversial remarks, such as not ruling out economic or military action to take control of Greenland or the Panama Canal and referring to Canada as the “51st country.” Krugman pointed to a “nearly unanimous” consensus among economists that Trump’s policies — which include high tariffs, tax cuts and mass deportations — are likely to trigger inflation, though the effects may not be immediate.

• “Still, if he were to go through with any significant part of that agenda, the Fed would definitely have to put further rate cuts on hold. In fact, it might feel the need to raise rates again.”

I have a few objections…

1. Rising long yields are not exclusive to the US (there you go)

2. Sure, yields are up since the election, but it’s not like they’re in uncharted territory

3. If it’s crazy, isn’t it a discount (prices are falling)?

This article was written by Eamonn Sheridan at www.forexlive.com.



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