The economy is doing really bad, shouldn't we be at all time low rates? Why not?

I didn't particularly like macroeconomics when I was in college.  It could have been the fact that my elderly college professor was one year from retiring and taught from his wheel chair in between naps.  Yes, I said in between naps.  At any given time after finishing a thought or assigning a pop quiz he might doze off.  I remember one class where he slept for a good twenty minutes, woke up and immediately started talking about his days as a peanut farmer.  His main competition in those days was former president and peanut farmer extraordinaire, Jimmy Carter.  The class, much like a pack of wolves, soon found the weakness of our professor and used it to their advantage.  If our teacher was talking about something particularly mundane one of my classmates would pose a question such as, "So you're saying the yield curve corresponds directly to demand?  How would that work in the real world with you and Jimmy Carter?"  The rest of the class would be spent with the prof going on and on with tales about peanut farming which usually involved three or four of the same stories he told during the last class.  Honestly, I didn't learn much.  It wasn't until much later did any of it make sense.  Supply, demand, stocks go up, bonds go down - it was all a jumble.  So here's my quick and dirty version of why and what is going on right now.  I promise not to talk about peanut farming.

 Let's start with investors.  When the stock market is doing good most of them put their money into stocks.  When the stock market is doing poorly most of them put their money into bonds.  It's that simple.

 It doesn't matter if you know what a stock or bond is to understand the next principal.  Supply and demand.

 When stocks are doing good demand goes up.  When stock are performing poorly demand for bonds goes up.

 So what is the stock market doing right now?  Bad.

 So that means demand for bonds is up right?  Right.

 High demand for bonds usually makes mortgage rates drop.  That's pretty simple, yes?

 Here's the kicker.  The supply of bonds is overwhelming due to the $885 Billion dollar government stimulus package.

 The governments issues bonds when it needs money. 

 Moral of the story:  Given the current economic status and all the other twenty something odd number of things that affect mortgage rates we should be at a true all time low.  The reason we are not is because of the increase in bonds being issued by the U.S. Government to finance the stimulus package.

 So, now the question to all refinance candidates is this:  What has to happen for rates to drop?  Demand for bonds has to increase or supply has to decrease? You are absolutely right!  You get an A.

 They key piece of information to look for is this :  The Federal Reserve has said the government will buy a large soum of bonds before the summer (they did back in December and rates dropped).  If those intentions are confirmed or they actually do buy a large chunk of bonds then we will see rates return to near historic lows yet again.  If not then who knows.