KIBU, you’re right that the government will attempt to keep rates low — however remember that the deficit is huge and unsustainable without borrowing from overseas. If the buyers start shifting from US treasuries, the US will go bankrupt. It’s that simple, and the government would much rather we little people go bankrupt in our overpriced McMansions than the government, which might actually have to curtail spending for once. So while they’re going to attempt to do what you say, Japan and China hold the reins in this scenario and we’ll follow wherever they lead us.
I agree that the dollar losing its reserve status is far-fetched, but I also think that double-digit interest rates are a possibility within the next few years.
