Paul Krugman

Bush-era deficits will lead to a US fiscal crisis in which the government turns to printing money and interest rates soar.

“My prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt. And as that temptation becomes obvious, interest rates will soar.”

Said on

11 March 2003 · New York Times column "A Fiscal Train Wreck" (March 11, 2003), quoted in a Mises Daily article

Source

Paul Krugman's Identity Crisis · Mises Institute

Should come true

No date given

How sure they sounded

My prediction is

Categories

EconomyMarketsPolitics

Importance

4 of 5 · A US fiscal crisis with soaring Treasury yields would have major global consequences.

Outcome

Inaccurate

More than 20 years later, no US fiscal crisis of this kind has happened. The 10-year Treasury yield fell from about 4 percent in 2003 to under 2 percent in the 2010s. Yields rose again in 2022-2023 on post-pandemic inflation and Fed tightening, not a deficit-driven money-printing crisis, and stayed well below "soaring" levels.

Evidence:

• https://fred.stlouisfed.org/series/DGS10