This theory fails to take into account the massive demand for, and hoarding of bonds, which began in the 1980's with structured finance and has only increased with the advent of derivatives and of clearinghouses. So, depressed bond yields are specific to bond demand.

Draghi should expand the TLTRO program, seen by Eric Lonergan to be real helicopter money. Expanding fiscal programs would be great if they could be paid for by taxation. I think deficits just create more bonds for the financial system's insatiable desire to hoard cheap collateral. I am not sure they help the monetary situation as they are not sustainable.

The liquidity never made it to main street. Tight conditions and the r* are proof. And what Williams doesn't say, is that the Fed likes things the way they are.

Weakness, and massive bond demand for use as collateral, appear to work together to push yields down. However, long bond yields declined since the 1980's both in good and bad times. I think many economists do not accept that the massive hoarding of bonds is a function of how the financial system is now constructed.

This of course, is a brilliantly written article that infuriates me. The statists want complete control. They are not yet in the majority, but we are heading their direction. This article is a must read that should be shared among the young people of this nation.

So, this could end up being a DB bailout by the US government. Why do we always have to be the ones who pay?

I think it is quite speculative. I can't imagine the car pictured as being something most people would want to buy, but thanks for keeping us up to date on this process.

As George Carlin once said, the elite don't care meaning the Fed (banker to the will of elite) doesn't much care. I have become more cynical and the Fed, first mispricing risk, then being slow to save the economy did more than destroy wealth. it transferred it from mainstreet to Wall Street. It almost looks preplanned, and there is a strong case that the Fed decided to liquidate the economy so that Wall Street could consolidate financial power in the Great Recession.

But of course, creating structured finance, bond hoarding and derivatives has just boxed the Fed in. It may be comfortable with that box, thinking not much could go wrong in the new normal it seems to relish. Although I am sure it is not without worry about what could go wrong.

If you read Stephen Williamson's blog you will see that the mind of the Fed as revealed by Prof Williamson is technical to the core, and involves just a little tinkering with rates and minimal Fed tools. The Fed really isn't worried too much about big moves, and as long as growth is slow, they seem fine with how things are, so far. And so far is no guarantee of future Fed success!

Won't counterparty risk cause more bonds to be bought to cover the margin calls? Yes, if some counterparties fail, the remaining ones will have to buy more and more bonds. But negative puts us into the unknown. For example, if negative rates decline by a large margin, and they overpower capital gains from price increases, it won't stop people from hoarding bonds, or will it?

Interesting take on this, Gene. I wonder if this attempt to eliminate the business cycle is dependent upon the counterparties being able to handle the risk they have taken away from the banks. I am sure that was Greenspan's plan all along, to make the banks walled off from business cycles, as long as the counterparties behave. Now that the counterparties have to deposit more collateral in the clearinghouses, that puts the clearinghouses at risk. One wonders how high that risk is at this time and what damage could be done if this risk comes back on those counterparties and clearinghouses.