Not a Mary Poppins Market!Tuppence, prudently, thriftily, frugally, invested in the...bank?Have you noticed the yield on a 3-month T-bill? It's 0.02%--two one-hundredths of a percent--about as close to zero, zed, zilch as you can come. Is this solely the result of the Fed's zero-to-0.25% target for fed funds (overnight lending)? I can't help but believe there's more to it than that.The 10-year T-note, meantime, is yielding 3.17%. Also low. Also suggestive of other forces at work on interest rates than solely the pressures brought to bear by the Fed.We are, after all, on the edge of the Fed's withdrawal from making regular purchases of billions of dollars' worth of Treasury securities. It's hard to keep straight, but the Fed's purchases were designed, if memory serves, to push more money into the economy (thus raising inflation somewhat) and to keep demand for Treasury securities high (thus keeping interest rates low).(1) As for inflation--we've seen the cost of oil (and gasoline at the pump) rise nearly mercilessly, along with the cost of food and commodities. Oddly, the costs of many other items (especially housing) have actually declined a bit. So-called "headline inflation," therefore, has risen. Last Friday's report told us the annual change in consumer prices had climbed 3.1% over the past year.The "core" rate of inflation, however--with volatile food and energy prices removed--was up only 1.3% over the past 12 months. Remember that the Fed insisted it wanted that rate to rise toward 2%, though not higher than that.(2) As for low interest rates, we saw them rise when QE2 was introduced, and then watched them fluctuate. And now they are remarkably low, but we doubt that QE2 applied the downward pressure resulting in nearly-zilch-percent-yielding T-bills. If it had, the imminent end of QE2 would surely mean that rates would already be rising in anticipation of the program's conclusion.What we are left with, as in just about every corner of our polarized nation, is two schools of thought. The first believes we're on the verge of devastating levels of inflation. If that is true, perhaps the Treasury securities markets are forcing the yields lower because no one wants to buy an investment you redeem in the future. After all, its value, after inflation rises, will almost certainly decline.The second school of thought believes we still have deflation to worry about, despite the (transitory perhaps?) inflated prices of commodities and oil. Deflationistas point to the utter lack of inflationary pressure from wages, and suggest that the jobs market is indicative of stagnant growth. Employers still have little need to expand their plants and increase their employment rolls. If this is so, Treasury rates have fallen to their current levels for the same reasons they have been falling for a couple of years: Investors are worried that we'll need low rates to stimulate a still-falling economy.What if national policy bases itself on one of the two possibilities to the exclusion of the other? It could turn out to be very misguided and wrong, perhaps expensively so. As one Deflationista, Paul Krugman, notes, "There will eventually come a day when the Federal Reserve Board should tighten--but that day is years away." Oh?The stark differences between the views of the Inflationistas and the Deflationistas are rather frightening. It seems incumbent upon us all to do the requisite studying and determine for ourselves whether our future will be determined by inflation or deflation. I'll keep trying...and I'll welcome your thoughts along the way.By Bill Fisher RateWatch