The question is: what happens to the long bond if the ROW (Rest Of World) decides they've had enough of US inflation?Are you saying that the ROW historically has *less* inflation than the US? Because that's just flat-out not true. For all the trials & tribulations of the USD, it has never been re-adjusted by lopping off a zero or two---unlike most of the ROW currencies.You are also, I think, assuming that the ROW puts money into the US to collect interest. This is mostly false. The main truth is that the ROW puts money into the US is because it is the safest place to put it. They are looking at it from the Will Rogers point of view: I AM NOT SO MUCH CONCERNED with the return _on_ capital as I am with the return _of_ capital."
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