Surowiecki is making a lot of sense:

The size of the move [in long-term rates] was undoubtedly eye-catching, but the notion that investors are starting to panic about inflation seems improbable at best, given the fact that even at its peak this week the ten-year note was yielding only around 3.7 per cent, which is still cheap by historical standards. (If you really thought there was a meaningful prospect of skyrocketing inflation, would you lend money to the government for ten years at only 3.7 per cent?) And while there is reason for concern about the recent rise in oil prices, given their psychological (and material) impact on consumer spending, the evidence of inflation in the real economy is just about nonexistent.

At the same time, the argument that a 3.7-per-cent—or four-per-cent—long-term interest rate is going to demolish the would-be recovery is mystifying. Generally speaking, steeper yield curves—that is, when long-term debt has a significantly higher interest rate than short-term debt—are what you’d expect when an economy is getting stronger (or at least getting less weak). And surely part of the weakening demand for long-term government debt reflects the greater (if still fragile) willingness of investors to take on some risk. The minuscule yields we saw on the ten-year note (which earlier this year fell as low as 2.5 per cent) were the result of, more than anything else, the enormous fear and risk aversion that gripped investors. The waning of that is, on balance, a good sign.

--Noam Scheiber