The bond vigilantes never showed up?

Interest rates didn't bark says Delong

Delong 2011: It is in this situation that we want a government deficit--the government to print and issue the safe bonds that private investors really want to hold. As these bonds hit the market, people who otherwise would have socked their money away in cash--thus diminishing monetary velocity and slowing spending--buy the bonds instead. A large and timely government deficit thus short-circuits the adjustment mechanism, and avoids the collapse in monetary velocity that was the source of all the trouble. And as long as output is depressed--as long as monetary velocity is low and there is slack in the economy--printing more and more bonds will have next to no effect increasing interest rates.

And he shows this chart:

Look at the rates from 2009-2011, up at 3.5%, when Brad says rates were low.









Here is the long view:

Interest rates did bark, right after the Nixon Shock.   Yes, rates are low compared to the monetary reset in 1972.  And much of the the debt from 1981 was buried in the 30 year bond, and in 2011, we rolled over some of that debt, then in 2014 we rolled over some of the lil Bush debt and some of the Kanosian Obama debt. But not quite fast enough as my previous post points out, the key variable is interest costs in DC. They spiked, as I noted in the previous post.

We are not going to get an interest rates spike because we are not going to do another Nixon Shock. And the long view is a long term trend down in the ten year rate.  2.5% seems to be near normal.  The question is why do we just now discover the true nature of rates? And why do we set rates at the central bank once every 40 years? And why do all those gray bars line up with the DC election cycle? The evidence points to a deep structural flaw in DC governance.