The market yawns

Where’s the market reaction? Yawns the prophet of Princeton, Paul Krugman in response to the passage of Obama’s health care bill.

In totally separate and completely unrelated news on the same day, the yield of the 10 Year US Government bond rose to 2.5 basis points above the 10 year interest rate swap rate (the rate at which banks can fix their lending rates to each other). (h/t zero hedge).

Allow me to explain how Obama’s passage of trillions of dollars of liabilities onto America’s children has no link at all to the fact that US government debt now requires a higher interest rate than the equivalent rate of interest charged between all of those bankrupt banks.

Er, hold on, something doesn’t quite compute here….

The serious point here, given that uncle Sam needs to pay roughly the same rate as its banks to attract finance, is that the next crisis is likely to be a governmental one (Sovereign risk in market parlance) rather than the banking system that created the risk in the first place.

The banking system is now a fully fledged arm of the state.

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