Those are interesting thoughts. Definitely outside the box. I hope it doesn't come to pass since I am long buckets of Eurodollar calls.:eek: As for flattening of the yield curve, there is a long way to go between where we are now and flat. I would note that Japan has had a relavtively flat yield curve for years (ranging from less than 100 bp to as much as 150 bp), and it hasn't helped them. If David Goldman is right, the yield curve will flatten on its own w/o Fed tightening. His thesis is that we are getting to a point where there won't be anything else to buy except for Treasuries. This should drive down longer term yields. As I've noted on another thread, I can't think of a more hated asset class on the planet than gov't bonds. "The most exciting returns are to be had from an asset class where those who know it best, love it least"
i agree that this will be the outcome if america does not restart the economy as the search for yield takes all to zero. that's why i say to make the curve flat to restart the economy - not to freeze the economy in a liquidity trap and wait till the curve flattens...