Neglected prophets!

[Paul Davidson <pdavidson@xxxxxxx>]

In an article entitled "The Dangers of Debt Reduction" on the editorial
page of the March 3, 1999 WALL STREET JOURNAL, Professor James Galbraith
and I wrote "The promised buy-down of the government's own debt, poses
another set of dangers. U.S. government bonds are a safe asset, completely
free of default risk. Their vast abundance are stabilizing elements in
world finance. Take them away and... private investors will be forced to
seek safety in hedging, which tends to destabilize financial markets".

The same theme has suddenly been discovered in a major article in the
February 17, 2000 issue of The New York Times entitled "Shrinking Treasury
Debt Creates Uncertain World". The Times reports that with the U.S.
repurchasing Treasury bonds "...the debt securities that remain in the
shrinking market are expected to be much more prone to wild swings in price
and therefore riskier to investors".

It took the New York Times almost a year to discover what was obvious to
Galbraith and myself.

Paul

Paul Davidson
Holly Chair of Excellence in Political Economy
Editor, JOURNAL OF POST KEYNESIAN ECONOMICS [JPKE]
Economics Department -- 523 SMC
University of Tennessee
Knoxville, Tennessee 37996-0550
email: Pdavidson@xxxxxxx;   phone: (865)974-4221;    fax: (865) 974-4601
http://econ.bus.utk.edu/Davidson.html