Largely because of the political context which we see unfolding, we think it highly likely that short rates will be held below the increase in inflation which we see developing over the next few decades. In contrast, however, as this new, uncomfortable, world emerges into clearer sight, long rates will start rising and very likely rise above the current rate of inflation. So, one of our conclusions is that the yield curve, which is currently flattened to an unusual degree, will probably steepen sharply.
