Flight to Safety

Treasury bills are now trading at the lowest rates in history. This article in Bloomberg news has the details:

The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001.

Essentially, the government is being lent money at zero cost. This, at the same time that the government is bailing out banks and the budget deficit is approaching $1trillion. One would expect a risk premium for lending to this government. But instead the flight to safety is causing interest rates to the minimum barrier of zero. This is truly a new kind of crisis.