Date: October 2012: Financial Insights for the Eschaton: One Reason Why I am Still in the Deflationist Camp

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.