In 1993, James Carville famously said, “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.” Even if your goal is not to intimidate people, it is undeniable that bond markets have a lot of power. If bond markets express their displeasure with the state of a government’s budget, it matters little in the long run how big that government’s army is; financial repression does not work forever, and at some point the government’s spending will decrease.
The utopia of infinite elasticity
The utopia of infinite elasticity
The utopia of infinite elasticity
In 1993, James Carville famously said, “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.” Even if your goal is not to intimidate people, it is undeniable that bond markets have a lot of power. If bond markets express their displeasure with the state of a government’s budget, it matters little in the long run how big that government’s army is; financial repression does not work forever, and at some point the government’s spending will decrease.