That model suggests the market requires a 2% real rate of return to hold government paper over a "riskless" asset like gold, doesn't it? Makes sense.

I think that works under a gold standard where everything is reasonably orderly and government excesses are "nipped in the bud" by the sight of their vaults emptying of bullion...

However, in a fiat world where governments (in the West) have taken on debts they can never hope to repay, I can't see how central banks can allow a real interest rate to occur as it will bankrupt their countries' government in short order through higher funding rates on their debt.

Perhaps this is why we've had a decade of gold price manipulation instead, i.e. because they can't keep the price in check using a real interest rate. I'd be suprised if the US/UK/Japan have real interest rates before about 2020...by which time they'll have cut the value of their currencies in half and maybe in half again...