Paul Krugman writes that TIPs (or Real Return Bonds in Canada) can be a useful indicator of the market's inflation expectations, though not a perfect one, in critical response to an FT article:
Treasury inflation-protected securities â bonds whose payouts are indexed to consumer prices â are really useful for economic analysis: they give an objective, market-based measure of expected inflation. But you have to be a bit careful about using them to interpret recent events, because the same financial disruptions that wreaked havoc with many assets also did some funny stuff to TIPS.
Krugman's second point, is that writers sometimes shape stories. Despite his criticism, inflation expectations based on his useful indicator are 1.98%.
Read the whole article here.
Krugman is an idiot. TIPS haven't been around long enough to know if they are a useful indicator of anything. He typically selects data that fits his opinion. Non-idiots form their opinions around available data. He's a glib, obnoxious little jerk who works for a company, the New York Times, that is nearly bankrupt because they rely on people like Krugman for financial advice.
Gary,
Thanks for your feedback. Its great to get your contrasting point of view, even your firm opinion.
Pierre Daillie
AdvisorAnalyst.com