Long-term rates are very close to breaking the post-May lows, the 10-year at 3.28 percent, and mortgages are doing even better, sliding toward 5 percent. We are moving into the next economic phase as well as the next stage of understanding, the two working together to change the credit markets. There is always some gap between economic reality and our grasp, but this two-year event, so extreme and out of prior pattern, has produced a chasm between competing theories. The winner is a tad improbable, or at least counterintuitive. The recession has clearly bottomed, which in normal times would mark the beginning of interest-rate increases, especially long term -- and instead they are falling. How can this be? First, the inflation freaks are gradually coming down from their trees. In...
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