Good to know that Felix agrees with me. Much better than "the lurkers agree with me in email." Felix Salmon:
How to avoid a fiscal panic: Edmund Andrews adjudicates dueling op-eds by Paul Krugman and Alan Greenspan on the subject of fiscal policy, and although he purports to come down somewhere in the middle, by the time he’s finished his prescriptions end up sounding very much like those of Krugman. Andrews is right to dismiss Greenspan’s weird focus on the 10-year swap spread as the harbinger of doom: it’s no such thing. It’s stretching credulity for Greenspan to paint the swap spread as a sign that the market is worried about the US fiscal situation, even as the more obvious places for expressing such fears — like the interest rate on Treasury bonds — show no worries at all.
Andrews is also right that no one can have much certainty about anything right now, and that no one knows where any country’s fiscal breaking point might be.... Andrews sounds sensible, then, when he says that it makes sense to insure against such an eventuality.... But the problem is that, as we discovered during the last financial crisis, you can’t buy insurance on the end of the world — or rather you can, but when the time comes to collect, you’re liable to discover that your insurer has gone bust.... Andrews is right that it’s a great idea to start putting together a long-term plan for dealing with the deficit, which is very much in unsustainable territory. I’m quite sure that Krugman would agree with him on that front. But my feeling is that the best way to put together such a plan is to start coming up with new revenue sources, such as a carbon tax / cap-and-trade system, or a financial-transactions tax. The more income streams that Treasury has, the less likely we are to see any kind of market panic.