The Bond War

Why Paul Krugman and Niall Ferguson are hammering each other about T-Bill interest rates.

By Daniel Gross
Posted Thursday, June 4, 2009, at 4:25 PM ET

It's fair to say that 10-year and 30-year Treasury bonds are not subjects that enthrall the American public the way, say, Kate Gosselin does. In the last six months, however, the state of those bonds has become the subject of feverish argument in the economic elite. The interest rate of the 10-year Treasury bond has spiked from 2.07 percent in December 2008, when the world was falling apart, to a recent high of 3.715 percent on June 1—a 79 percent increase. The 30-year bond has risen from 2.5 percent last December to about 4.5 percent today. Now factions led by economist Paul Krugman and historian Niall Ferguson are feuding bitterly about the import of these charts. In late April, Krugman and Ferguson squared off at a New York Review of Books/PEN panel, and they've continued with an op-ed war in the Financial Times and New York Times (Ferguson here and Krugman here).