Two Questions

[coalition_unwilling]

1. It helps to distinguish between the nominal rate of return (the

stated interest rate on newly-issued 10-year Treasuries) and the 'real' rate of return (the nominal rate minus inflation). The fact that Treasuries' current nominal rates reflect zero fear of short- or medium-term inflation suggests that the aggregate demand curve is re-setting at a price-neutral or even price-deflationary locus.

Government 'deficits' are only one part of the general macroeconomic equation. If consumer spending and business investment dry up, then even massive increases in government spending will not produce inflation, i.e., higher interest rates.