Krugman on What the Markets Really Want

It's a version of arcane hermeneutics, like Kremlinology during the Cold War, where tiny signs require detailed interpretation. Krugman explains what some recent market behavior means. H/t Atrios.

But if you read the Bloomberg piece carefully, what it actually says is that market players fear that the absence of a debt deal means no stimulus. So the actual fear is not that spending won’t be cut enough, it is that it will be cut too much — which actually makes sense, and is consistent with the action in stock and bond markets.