10-Year Treasury yields are testing support at 2.00 percent -- a 50-year low. One thing is clear: Fed monetary policy has failed. Suppressing short-term interest rates has, in most cases, lifted the economy out of recession, but also set us up for an even bigger crash the next time round -- requiring even more severe interest rate cuts. Long-term yields have been falling for 30 years. We are now clipping the tree tops -- with short-term rates near zero and no gas in the tank to lift us over the next obstacle. A bond marketrevolt cannot be far off.

A "bond market revolt" is a general sell-off of Treasurys when bond-holders decide that rewards (yield) are not commesurate with the risk. We have already witnessed several bond-holder revolts in European markets. A rise in yields would raise the cost of rolling-over existing Treasury debt, ratcheting up the budget deficit even further. This is a threat that shouldnot be ignored.