Look at Japan.
Rates are going to stay low for a long time. Inflation is going to stay low for a long time. Why? Because, among other things, growth is going to be anemic and unemployment is going to stay high for a long time as a result of artificial wealth being wiped out when the bubble burst. Even with aggressive action by the Fed and the Congress (which is probably hoping for too much), we're still looking at years of pain before we have to worry about high interest rates.
Under these constraints, worries about hypothetical debt payments is looking for invisible bond vigilantes.
Japan has gone through this for 18+ years. Their government debt is far higher than ours under any thus-far conceivable situation (189% of GDP - http://en.wikipedia....es_by_public_debt ). Japan's 30 year bond rate is 2.09% - http://www.bloomberg...ment-bonds/japan/ Japan's unemployment rate is 5.0% (high for them, roughly like 10% for us (it used to average 2.6%)), and it's latest CPI is -0.6% - http://www.stat.go.jp/english/
That's the kind of things we've got to look forward to unless Bernanke, Geithner, and the Congress get their acts together. (Of course, it's not a perfect comparison...)
China has many bubbles it is trying to combat. It's anyone's guess whether they'll succeed. We aren't going to have 10% growth for years on end...
Again: Things are different at the zero lower bound. It's very hard to get out of a deflationary trap under the best of circumstances. Evidence and logic tells us that it's much more sensible to get the economy moving at a pace large enough to substantially decrease unemployment than to worry about invisible bond vigilantes...
Cheers,
Scott.
