First it was technology stocks.

Then houses.

Now U.S. Treasury obligations.

I guess you can’t keep a bubble down.

But it doesn’t seem right. How can a government as irresponsible as ours be rewarded with such low interest rates? The answer, which we all know, is simple. This isn’t about them. It’s about us. This isn’t a just world; it’s a pragmatic one. When things start to crumble, money moves to safety. U.S. Treasury obligations represent the safest of all securities. They are a good place to hide while the smoke clears.

The figures are stunning. Shortly before Bear Stearns vaporized, three-month Treasury bills were selling to yield an annualized 1.16 percent. By last Monday, when it was announced Bear had sold itself to JPMorgan Chase for pocket change, three-month T-bills were selling to yield 0.65 percent.

This doesn’t happen very often. Using the long historical record from the Federal Reserve, for instance, I found that you had to go back more than half a century to find T-bill yields that low. The only time they were consistently lower (try 0.07 percent) was at the bottom of the Great Depression. Similarly, you have to go back at least half a century to find yields of 2.4 percent on 5-year Treasury notes or the 3.44 percent of current 10-year Treasury bonds.

Inflation, meanwhile, is running a strong 4 percent a year, even after the zero percent rate for the month of February. So unless inflation slows sharply in the next year, T-bill investors are flocking to an opportunity to lose purchasing power. And that’s before taxes on the piddling yield they will receive.

Consider the 2-year Treasury note. It’s currently yielding 1.33 percent. So you’ll earn 2.66 percent before taxes over the next two years, or an even 2 percent after taxes at 25 percent. Meanwhile, if inflation persists at 4 percent, you’ll lose 8 percent of your purchasing power over the same two years. That means a net loss of 6 percent in two years.

The bidding for TIPS, Treasury Inflation-Protected Securities, is even more indicative of a flight to safety. According to Bloomberg.com, 5-year TIPS were providing a negative current yield of 0.03 percent. Yes, you read that right: a negative yield for five years. This means TIPS buyers are so worried about future inflation they are willing to lend their money to the U.S. government for a slightly negative real return, just for the reassurance that the value of their principal will be adjusted upward to reflect inflation--- even though the inflation compensation they receive will be taxed.

That’s another guaranteed loss of purchasing power.

When investors are willing to accept certain losses on Treasury obligations, expectations for other investments have to be really grim.

Now let’s ask the really hard question: Will those who went to cash know when to buy again? The answer from history is “probably not.” Most will be too scared to reinvest.

Meanwhile, let’s consider the positive side of the current pain.

Bear Stearns is gone. Adios.

So are many mortgage brokers, investment firms that leveraged mortgages, hedge funds that borrowed heavily, etc. Good riddance.

What we’re watching is the deleveraging of finance. That’s a good thing. It will hurt the rest of us, too, but it’s still a good thing. Collectively, we’re only bruised. They’ll be buried.

We’ll change our behavior to avoid future bruising.

We won’t rely on our houses to substitute for real saving.

Millions have learned not to trust lenders and brokers offering great investment opportunities. That’s a good thing. We’ll borrow less. We’ll pay off debt sooner. Over time, we’ll liberate much of the money wasted on interest payments. We’ll use it for real saving or needed consumption.

When we’ve done that, our dollars will be stronger.

Bring it on.