My view has been that, for QE to work,especially against Debt-Deflation, you need short term interest rates to stay low, while you need long term interest rates to rise. In terms of incentives, you want to attack the fear and aversion to risk, by having a disincentive to buy short term bonds at no yield, the flight to safety, giving a push towards stocks and corporate bonds, and you want rising long term interest rates, signaling confidence in a recovery, as the spread is widening, and giving an incentive for longer term investing. It seems to be working.

I think that this is the first post that I’ve found that at least posits this position, but I thought that this is what Bernanke was aiming for when he said that he wanted to attack the problem of the fear and aversion to risk. Quite frankly, the longer and shorter term rates moving in tandem doesn’t make sense to me, unless you’re trying to work simply on mortgage rates, which to me is a bad idea.