It wasn’t so long ago that American politicians lived in fear of the bond market. During the Clinton administration, James Carville famously said that “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.” That phenomenon gave rise to the concept of the “bond market vigilantes,” which Krugman loves to employ.

But today, the bond market vigilantes are not much in evidence. Or rather, they are in evidence, but they suddenly seem unable to have much of an impact on US fiscal policy. Bill Gross, of the ludicrously enormous bond fund PIMCO, is running around screaming about the need for more borrowing and more stimulus. But he has no  effect, because it turns out that while bond investors have powerful ways of constraining US government borrowing, they have only indirect and weak means of expanding it.

The United States has a large debt that is routinely rolled over, and it generally runs a budget deficit (Clinton interregnum aside). If bond investors start demanding higher interest rates on government debts, this immediately raises the cost of borrowing for the US government. This, in turn, has knock-on effects throughout the economy, as interest rates rise for everyone and economic activity is thereby constrained. For these reasons, the US government has powerful incentives to avoid doing things that cause the interest rate on treasuries to rise.