Would anyone in their right mind purchase a 30-year TSY security to earn 2.93% if one believes in the current inflationary aphorism? In other words, the above chart depicts one reason why I am still in the deflationist camp. Since 2009, the Fed's balance sheet has increased reserves (liquidity) to the banking system by close to $3 trillion. if you take into account QE1, QE2, Operation Twist, and QE Eternity. In spite of this excessive injection of liquidity into the economy, long rates have plummeted, which is indicative of a deflationary environment.
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