Nor should you take seriously analysts claiming that we’re seeing the start of a run on all government debt. U.S. borrowing costs actually plunged on Thursday to their lowest level in months. And while worriers warned that Britain could be the next Greece, British rates also fell slightly. Paul Krugman, May 6, 2010
Not 12 months ago, Paul Krugman mocked Eugene Fama's Efficient Market Theory-based views on the Tech and Housing Markets via Larry Summers "ketchup economists" paper:
What this [Fama's tirade against the notion of "bubbles"] made me think of was an old paper by Larry Summers mocking finance economists as the equivalent of “ketchup economists”, who believe that they’ve demonstrated market efficiency by showing that two-quart bottles of ketchup always sell for twice the price of one-quart bottles.
Recently, however, as the opening paragraph (above) illustrates, Fama's efficient market theory- in brief (and without nuance): market prices quickly reflect all new information reasonably accurately- is now a sufficient basis from which to calm nerves over sovereign debt problems in the US and UK markets.
Perhaps Mr. Krugman doesn't like ketchup, tech stocks or houses, but does like cheap government debt issued by the US and UK (maybe that's where the Nobel prize money is invested?). Whatever the reason, Mr. Krugman can't have it both ways- either current market prices and recent reaction to news are not sufficient cause to dismiss "bubble" qualifications (which is my view) or they are (or there's an alternate theory which leads him to think US and UK debt is "safe" while Tech and Houses weren't).
If so, I'd love to read about it.
Given the recent kerfuffle between Mr. Sorkin and Mr. Krugman at the NYTimes over the nuances of Mr. Krugman's views on bank nationalization, I'm sure Mr. Krugman would argue I misread his meaning. Maybe so. Unlike, it seems, Mr. Krugman, I can understand how an author's intent wouldn't instantly manifest in a reader's mind (perhaps Krugman is an advocate of the efficient prose theory).
Your author meekly mining the economic press on a lovely Friday afternoon, signing off.