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I think you are getting things backwards a bit. First, just to clarify, I never said interest rates were zero, but close enough to it, which is the case for all bills with short to medium term maturity.
In any case, it is not the rate the govt is charging others, but that it is paying on its bills, or the interest it is paying when it borrows money. It has little to do with the deals the financial institutions are making, other than to say that the scenario for private investment is so bad that people, not only around the world but within the US itself, prefer to make almost nothing lending to the government than receiving an uncertain percentage from private investments.
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