Lest you be tempted by this news into some kind of moment of optimism, though, now comes a new economic indicator I had never heard of before, the TIPS spread, the difference between nominal US bond rates and rates on Treasury Inflation-Protected Securities. And Paul Krugman says it looks bad:
Too low is as bad, or worse, than too high — if expected inflation is low or negative, even a zero interest rate isn’t that good a deal, and the Fed may have a hard time booting us out of a recession.Well, it's much too low, lower than it's been in years. Krugman says this could point to the possibility of a "Japan-style trap," which could mean we're headed in the direction of an L-shaped recession that never gets better. Happy Sunday!