Noah denkt™  -
    Project for Philosophical Evaluations of the Economy
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Watch the development of the French-German government bond spread!
Observation on the Pro- vs. Contra-Keynesian debate of our times, drafted and published on May 24, 2012
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The economic commentary surrounding yesterday’s EU summit in Brussels would have you believe that there is a
pro-Keynesian, pro-
Eurobonds consensus building in the international community and in the financial markets.
After all, it appears now as if this consensus doesn’t just comprise your usual suspects, such as
Hollande’s
France, Monti’s Italy and Rajoy’s Spain, but rather also includes otherwise reasonable observers from Britain and
the US which perhaps not so surprisingly like to see a bigger Euro spending on the part of the German tax payer.  

And yet one shouldn’t fool oneself thinking that the international public opinion (or better: the internationally
“published” opinion) on one hand and market sentiment on the other are necessarily one and the same thing.
Because the computed market sentiment doesn’t just include the opinion of those who are media and
establishment favourites. No, the computed market segment also reflects the interpretations of those who are not
lucky enough to get courted by the powers that are but who, nevertheless, like to put their money where their
mouth would be if only they were asked to open it. In that, it seems to us, as if there is only one and one indicator
only, that can really tell us what markets think in the
pro- and contra-Keynesian debate of our times. And, if we
are not mistaken, that indicator would have to be the development of the yield spread between the German and
the French 10 year government bonds. Because here it is, where commentators do not just vote with their opinion
for what they think is right. No, here, they do in deed put their own livelihood on the line when deciding to back a
German supply side approach or to go with a French demand stimulus tactic. And funnily enough, according to
our own humble findings and calculations, this yield spread between the German 10 year bund and the French 10
year bond has widened from 106 basis points a month ago, to 110 basis points a week ago, to 132 basis points
yesterday. Does that warrant any further questions? Do these numbers really ask for more jockeying in the court
of public opinion? Or can we now take it that reason is already shaping up to prevail?

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Keywords:

Merkel vs Hollande, politics of austerity, future of the EURO, Euro crisis, financial markets vs
public opinion, financial markets versus published opinion, supply side versus Keynes, supply side versus
demand stimulus, pro and contra Keynes, end of Keynes, pro and contra Euro-Bonds