[jbooth]

As far as the rates that the feds have to pay to borrow money -- that's set by the market. They can issue bonds at 0.25% and people will buy them, therefore the interest rate is that low. It's not like they're forcing people to buy. The feds aren't setting the price for that interest rate -- well, they are, but what people are willing to pay is actually what sets the price.

Quantitative easing actually should, in theory, lead to inflation and higher interest rates. It's basically printing money. I think you have it confused with counter-cyclical fed reserve short-term lending rates which, by virtue of being very low, induce banks to lend money at only a little higher.

[laughfactory]

It'd be one thing if "people" were buying the debt they're issuing as you suggest. But a lot of the Treasury debt is being purchased by the Fed. So they're keeping it all in-house. Can you say, corruption? It's an artificially low rate which few people in their right mind would pay. Which is why the only taker is another arm of the government. Currently the Federal Reserve holds $1.825 TRILLION of US debt (Treasury Securities). I.e., the Fed owns more US debt than anyone else. China holds $1.22 Trillion, Japan hold $1.097 Trillion. http://research.stlouisfed.org/fred2/series/TREAST?cid=32218 http://www.treasury.gov/resource-center/data-chart-center/ti...