As much as I admire Paul Krugman and agree with most of his writings, I must say his latest New York Times column smacks of bad faith. Why am I saying that? This is what he writes:
Both nations [the U.S. and Greece] have lately been running large budget deficits, roughly comparable as a percentage of G.D.P. Markets, however, treat them very differently: The interest rate on Greek government bonds is more than twice the rate on U.S. bonds, because investors see a high risk that Greece will eventually default on its debt, while seeing virtually no risk that America will do the same.
Everything in this paragraph is true, that's not the issue. The problem is that, in most of his writings, Paul Krugman berates markets when they don't agree with his opinions. I remember quite a few columns in which he wrote words to the effect that "markets don't seem to agree with my way of thinking but we all know markets are stupid and anyway I don't care about markets and neither should you". But in this case, since markets seem to be giving the U.S. a pass lately (who knows for how long), mostly because American finances are a paragon of virtue compared to European finances, and that squares with his opinions, all of a sudden he has newfound respect for them. Better late than never I guess.
Or maybe this is just another example of someone talking his book, which is as close to a universal law as any Wall Street old saw.
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