The NYT told readers that: "The pound fell to $1.4954 on Tuesday, its lowest level against the dollar in nearly 10 months. The yield on 10-year government bonds, known as gilts, slid as investors fretted that Parliament would be too fragmented after a crucial election in May to whip Britain’s messy finances back into shape." That's pretty good that the NYT can read concern about this complex scenario into the market's 1-day movement. It is especially impressive since the yield on the 10-year bonds seemed to go the wrong way for this story. A lower bond yield usually means that investors are less concerned about the country's prospects and therefore require a lower risk premium. The biggest threat to the UK's economy is that it appears to have re-inflated its housing bubble. This is setting up the country for a further economic collapse at some point in the future when interest rates return to more normal levels. The NYT's market insiders were unable to see to the problems developing from the bubble originally so it should not be surprising that they still have little understanding of the economy.
--Dean Baker
