Did the Treasury bubble burst?

Socialist democracies in Europe, as well as the United States, are routinely running budget deficits. The deficits are incurred to cover inefficient programs in the areas of medicine, retirement pensions and other social programs designed to secure votes.

The problem with the accumulating deficits is that the interest on it automatically adds to a nation's cost, so that if there is a recession, the deficit works against the stimulatory effect of quantitative easing. There is another problem that arises from this. If the interest rises on the debt, it soon begins to consume a large part of the revenue. For example, the National Debt now stands at $16T and still rising steeply. Ten year Treasury notes brought in 0.014% annual interest which works out as $224B annually. As the interest rate rises to 6%, the total interest on the Debt rises to $16Tx.0.06 or $960B annually. At a 7% interest, the interest on the Debt is $1.12T. Added to the deficit of $1.3T, the sum of the deficit and the interest equals the Federal government's revenue.

The FED has been buying Treasuries, creating the biggest financial bubble the world has ever seen. At a 1.4% return annually, the suckers who put their money in Treasuries had lost 2.6% at the government's official reckoning of 4% annual inflation and 6.6% at the unofficial reckoning of 8% inflation. As the fact dawns on would be bond purchasers, they demand higher returns to compensate for future inflation. But, higher return signifies the bursting of the Treasuries bubble. Here is the latest graph on the return on Treasuries:

Without further QE, Treasury interest rates will rise steeply. If there is a third QE, then inflation will really take off.

Spanish and Italian 10 year bond yields are dropping again, because their banks are buying the country's bonds. This pushes the banks toward insolvency and increase their deficit, because interests paid increase.