The interest rate on 10-year Treasury bonds in the third quarter of 2010 has averaged less than percent. 7 It is not plausible that interest rates could decline much further, even in response to the most extreme fiscal adjustment. The short-term rate in the United States is already at zero so it can literally fall no further, and the long-term rate will surely reach a plateau in excess of zero. After more than a decade of deflation, the interest rate on 10-year bonds in Japan is still percent, leaving a real yield that is approximately the same as in.
