A simpler explantion of interest rates and debt and recession

Using a queuing model, we can simplify the DeLong and Krugman effort at explaining the current yield curve.

What happened is the the consumer retail model changed abruptly in response to technology. Transaction rates in the consumer section of the yield curve slowed. Short term interest rates (3 month to 5 year terms) dropped to match the lower transaction rates. The longer term portion of the yield curve is being supported by government borrowing. The resulting steepness is a result of government having no efficient method to deliver consumables to the consumer. Interest rates rise to match inventory build up.

What is the outcome? Eventually DeLong, Thoma, and Krugman will realize that government is not delivering equivalent product and they will concede the problem. Then we can begin rebuilding the retail system. We will write down all the government's incomplete program starts and raise taxes to cover the losses.

The question the Queen wants to know is why did the consumer model suddenly change in 2008? The answer, gas prices forced consumers to utilize the internet for smart shopping and the retail strip malls collapsed. The housing bubble was a small over-rection the the greater utility of the house relative to transportation. The house allows smart shopping by letting the consume maintain inventories at home and stop the casual drive to the store.