"Yesterday Jason Zweig wrote in the WSJ about the various worries that government bond holders have. Zweig’s biggest worry isn't default, but what economist Carmen Reinhart of the Peterson institute of International Economics calls “financial repression” or the use by governments of harsh methods to dig out from under burdensome debts. One example would be keeping short-term interest rates below the level of inflation so a government can pay off debt with cheapening money.
Bingo. On April 12 the Treasury sold $14 billion in TIPS at a median yield of -.26% real with the highest rate paid of -.18%. There is no doubt about it, the debt will be paid back with cheaper real dollars. If the debt ceiling gets lifted, looking at the trends below the Treasury maybe able to sneak in some more of these “repressive” bonds..."
at http://seekingalpha.com/article/271221-financial-repression-paying-down-debt-with-cheaper-dollars?source=feed
No comments:
Post a Comment