Apparently no one can predict the future, including, but not limited to, bond traders. However, they have a better track record predicting inflation than I do. Thus, when the Treasury yield spread widens to over 2 percentage points, and when the long Treasury bond has backed up almost a full percentage point even as the Fed has repeatedly cut the funds rate, it would be folly to ignore this development -- particularly in view of the burgeoning budget surplus and the accompanying decline in the number of long bonds outstanding. That leads to one of the following conclusions: