"...since you probably know more about this than me."
Actually, nobody really knows anything about this. It is all guesswork, and I have no confidence in either direction on long term rates--that is why I have I have plenty of short term treasuries as well, along with gold and bets on some non-US companies.
That said, the bullish scenario for US treasuries would include (besides the safety aspect that has been playing out recently) the idea that inflation is a lagging indicator. If we get a severe recession or depression in the US, what will happen to the economies of Europe and Asia? I think they will follow us down--maybe not as bad, but perhaps bad enough to cause a crash in industrial commodities prices, including oil. There is a lot of leverage supporting commodities too, and supplies from new sources that could hit the market just as demand sours.
There was inflation in the US just prior to the 1930s and in Japan in the late 1980s--certainly inflation of financial assets (i.e., bubbles, such as we have been having in stocks, real estate, art, etc., in the last 20 years.) Only as the bubbles deflated did price deflation show up.
The unwinding of leverage in the financial system going on now means an unwinding of credit, and without credit, what creates the demand that pushes prices up? A worldwide deflation and depression is a possible outcome of this unwinding, in which case long treasuries will do very well. |
