So interest rates on US debt remain low despite large deficits, and we're told that this reflects very special factors, indeed that the low rates present a "conundrum".
But is it really a conundrum if it was completely predictable – and predicted?
This pushed us into a liquidity trap, and as I explained three years ago, this meant that budget deficits would not, in fact, put upward pressure on rates.
This wasn't exotic theory invented on the fly, it was basic IS-LM, the sort of thing every macroeconomist should know. The same analysis, not incidentally, predicted no inflationary consequences of massive "money printing" on the part of the Fed.
I continue to be impressed by the unwillingness of many people to admit that maybe basic Keynesian analysis has something to it, even after three years when this analysis has repeatedly made correct predictions in extreme conditions — while other approaches have failed dismally, and cost those who believed in them lots of money. My best guess is that this is another case of tribalism triumphing over critical thinking and evidence.