Fascinating column here on the “puzzling” rise in short-term interest rates and decline in long-term rates.
At least he offers some alternative “gloomy” theories behind our flattening yield curve, but ends on this:
All this attests to our economic ignorance. There are no simple rules (budget deficits, for instance) to explain interest rates. My view is that low interest rates are mainly a good sign. They reflect not only low inflation—but growing confidence that it will stay low. We may be reverting to the 1950s, when this was the norm. In 1959, the rate on the 10-year Treasury bond averaged 4.33 percent. This is a reassuring notion; but it could also be wrong.