Sunday, May 22, 2011

Lean Days for Banks Ahead?

Interesting possibility here: keeping short-term interest rates below the level of inflation, a government can pay off its bondholders with cheapening money. Through regulations, it can compel banks and other financial firms to buy its own debt, much like geese being force-fed for foie gras. As a result, current yields and future inflation-adjusted returns on government bonds fall.

Describing a possible Geithner/Default-mitigating tactic.

So your banker will be on a forced diet.

HT: POWIP (While you're there, scroll down to the section where Meep takes a cold-eyed look at "responsible public officials.")

No comments: