Paul Krugman attacks the "deficit squeamishness" of the Obama administration again. The issue, as he understands it, is that government officials "don’t trust the demand for long-term government debt, because they see it as driven by a 'carry trade,' " which, as TBM explained this week, is when players borrow cheaply in the short-term and use that money to buy long-term bonds. The fear is that long-term interest rates may rise, resulting in losses for those doing the carry trade, forcing them out and crashing the Treasury market. But as Krugman says, "The whole problem right now is that the private sector is hurting, it’s spooked, and it’s looking for safety...[m]eanwhile, the public sector is sustaining demand with deficit spending... ." Further, he asserts that the relationship between public and private borrowing isn’t dangerous because we are facing a prolonged period of near-zero short-term interest rates. In fact, he says, it is the thing that will help the nation climb out of unemployment.

Brad DeLong turns his sights to the interest rates as well and applauds Paul Krugman on a thorough analysis. But he doesn't really agree with Krugman. DeLong narrows in on Krugman's assertion that the underlying problem is a "a technical matter of maturity mismatch." DeLong points out that our read on the market may not be so straightforward. He says, "The long Treasury market is thinner than many people think: it is not completely implausible to argue that it is giving us the wrong read on what market expectations really are." All in all, DeLong is just more hesitant than Krugman. DeLong says, "[t]his is something to think really hard about."

Felix Salmon wags his finger at the SEC today. He cites a report put out by oil consultant Alan von Altendorf that lays out the commission's plan to allow oil companies to "to use internal, proprietary computer models to essentially pull their 'proven reserve' numbers out of thin air." Salmon asserts that this is just another failure in accountability and regulation, by the institution whose job it is to ensure just those things. He says, "Frankly, it’s not thinking at all: this is just another case of regulatory capture. And a sign that, so far at least, nothing has changed at the unsalvageable and dysfunctional institution."

Barry Ritholtz doesn't say too much today. Instead, he makes two recommendations: one book (The Greatest Trade) and one Web site (Innumeracy.com).