Buttonwood: Now you see them

Posted: April 4, 2014 in economy
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Can anyone stop Narendra Modi?

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Central banks will be financing governments on a permanent basis

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EVERYBODY would like a rich uncle to help them when times are hard. And that is the role central banks have been playing in recent years, easing monetary policy at a time when economic output is below trend and the scope for fiscal stimulus has been reduced.
The most controversial aspect of this support has been “quantitative easing” (QE), the creation of money to buy assets, mostly government bonds. Central banks resorted to this expedient in the depths of the crisis as interest rates approached zero. The role of QE was to provide liquidity to the system and to ensure that long-term rates did not rise too far.

The policy had the useful side-effect, as far as governments were concerned, of providing a willing buyer for their bonds at a low interest rate. To be fair, central banks did not buy in …

via Economic Crisis http://ift.tt/1k5xj1x


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