As a result, Rosenberg is far more optimistic than I am about the Treasury bond market, seeing it as massively oversold. He also points out, given that the US is in deflation, that real yields are very high. I can understand his reasoning for domestic investors. For foreign investors, however, the worse the data appear, the bigger the budget deficit will get, the more the Fed will have to indulge in quantitative easing, and the further the dollar will fall. But it is hard to argue against Mr Rosenberg's record.
Again, I think this really is a time horizon thing. During the next, I dunno, 6-24 months deflation is probably the big worry, and the Fed will be quantitatively easing away. Once it stops though I worry that inflation will take off like a rocket without warning.
The scary thing is that nobody really knows. This situation is so atypical that nobody is very sure what can or should be done.
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