Bloomberg.com is revealing amazing moves down in global interest rates that are already at or near record lows (LINK to UK rates, click around for those of other major countries). Japanese JGB's have been collapsing, to 68 basis points on the 10-year and 186 bps on the 30-year. This with the threat to create 2% inflation! Just as happened when the US lost its AAA rating from S&P, now the UK has lost its AAA rating to Moody's and its interest rate structure has started to collapse. Following the equivocal Italian election, German interest rates, which had been trending down anyway, moved sharply lower.
If governments were really "stimulating" anything much, interest rates would be rising in response. This looks to me as though we need to watch out for an unwanted downturn in the global economy.
With taxes having risen beginning in January, and with about 1/2 of one percent of economic activity (annual rate) scheduled to be withdrawn from the US economy in a few days, can Treasury rates at home fail to drop in sympathy? If rates in major countries drop, and ours stay up, that would not be good for the president's goal to double exports.
Meanwhile, I lost the link, but I saw an article on the 'Net today quoting a JPM exec that an awful lot of bad deals were being done in commercial real estate by the competition that had run out of many sound loans to make. Of course, he (she?) said that JPM was only making good loans.
I have heard this from bankers before. The last time I personally heard this was from my Smith Barney broker, probably in 2007 (maybe in 2006), that BofA was making terrible loans, and was stealing business from Citigroup (which then owned Smith Barney). Well, it turned out that we were near the peak of the economic cycle, and both BofA and Citi were making horrible loans by the boatload.
While I am not at all a deflationist, I still think that if the stars align as they may be doing, we could see much lower interest rates come to the US by the end of 2014. After all, the trend is your friend until it ends.