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The internal contradictions of QE ... or should it be Quite Erroneous?

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Has there ever been a time when monetary policies worldwide, and also the analysis of them, have been as blatantly self-contradictory as now? There are numerous examples both of contradictions and damage.

At a time when interest rates all along the yield curve – from short-term rates to bonds of 20 years or more to maturity – are at an all-time low, should not the public sector be trying to lock in such low rates for its borrowing? This could be done by shifting to borrowing at much longer maturities and duration, and indeed replacing existing debt with the proceeds of such borrowing.

The public sector is, after all, the biggest debtor in most economies, and in the UK and other developed economies by far the biggest. But if one adjusts for Central Bank swaps, which involve buying from the private sector much longer-term debt and in exchange supplying sight deposits, the overall maturity/duration of public sector debt has in most countries practising QE been going down, not up. That is surely the wrong thing to do.

More of Goodhart at the link.

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