Jonathan

Welcome to Jay Manifold, who blogs at the excellent A Voyage To Arcturas and joined us at our blog bash last weekend (Jay’s account of his trip to Chicago is here). Jay has graciously agreed to blog with us, at least some of the time, and we only had to offer him double his salary from Arcturas to get him to do it. He appears to know a lot about everything, and I fully expect to see him and Lex ruling the world one day. Until then we can look forward to reading his posts.

See you there!

Chicago man Scott Burgess is now blogging from London. We look forward to hearing more from him.

Thomas Sowell writes:

Politicians who claim to be able to “bring down the cost of health care” are talking about bringing down the prices charged. But prices are not costs. Prices are what pay for costs.

(via Samizdata)

*The economist Frank Knight is reputed to have quipped: “A just price — just what price?”

A few weeks ago I fretted about the apparent contradictions of Bush’s economic policy. I thought that

Either there’s going to be continued economic recovery and bonds are going to get killed, or there’s going to be a weaker recovery combined with inflation and a weak dollar and bonds are going to get killed.

Now I’m not sure. Stocks haven’t been able to rally in the short run, the dollar is weaker, and the bond market is bubbling and simmering.

Note also (e.g., here and here) that growth rates in monetary aggregates slowed significantly during recent months. It’s conceivable that the markets have already discounted expected inflation. Rates may yet go up as the economy continues to recover, but in the short run, at least, inflation fears may not be as potent as they were a few months ago.

There’s a bunch of economic statistics due to be released Friday. Recent number releases have tended to be upside surprises that were positive for stocks and negative for bonds. The same thing could happen tomorrow. However, the markets seem to have begun to discount optimism. If tomorrow’s data come out below expectations we could get a big break in stocks and a pop in the bond market. That would be the path of least resistance.

Maybe in the long run bonds really will get killed, but that forecast seems premature for now. Too many people expect it, just as too many of us are waiting for a stock rally. Market reaction to the coming data releases should help to clarify whether the bond market’s recent strength will continue or has run its course.