As if T-bills were no better than cash

This would be just another boring example of media ignorance, except that Sorkin is billed as “a financial columnist for The New York Times. Or maybe that’s not news after all.

Let’s See, Low Interest Rates Mean that Investors Have Trust

Somehow the world got turned upside in a Vanity Fair excerpt of a book on the financial crisis by NYT reporter Andrew Ross Sorkin. Sorkin, in outlining the dimensions of the financial breakdown following the collapse of Lehman, tells readers: “Treasury bills were trading for less than 1 percent interest, as if they were no better than cash, as if the full faith of the government had suddenly become meaningless.”

Actually, the full faith of the government suddenly was a really big deal. Interest rates of less than 1 percent meant that investors were willing to sacrifice interest payments precisely to take advantage of the full faith of the government. Investors were looking for security, not returns, and at that time, they considered government bonds to be very secure.

Thanks to Ken Broomfield for the tip.

—Dean Baker

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