Before 2008, the cost of accumulated foreign debt will add up to the baby boomer retirement to bring down the dollar to half its current value. Inflation will shot up 10%, interest rates even more, recession of -5% a year will hit, riots will ravage some cities.
Following this, we will reach the peak of oil production (2015 2020). Oil prices will reach $120 per barrel and keep rising. We'll fall in a downward spiral from which the entire western civilization will never recover.
Perhaps you missed a rather quiet but significant recent development. China went from exclusive reliance on the Dollar for its currency investments to a market basket of currencies which includes the Dollar, the EURO and certain other currencies. No country will continue to take a hit on its Dollar holdings without hedging its risk by investing in other currencies. China is many things but irrational is not one of them.
Don't mid and long term rates tend to follow short term ones? ================================== Not necessarily. For instance, it is possible (while unusual) to have a so called "downward sloping curve", when long rates are close or even even lower than the short ones - it's one of indicators of a coming recession.
An when you think about it - Fed is raising short rates to prevent a raise in inflation thus keeping long rates at bay.