Saturday, June 22, 2013
Don’t buy bonds
If there is a serious withdrawal of pension funds from bond purchases, then government debt financing will become disproportionately harder. IMO (...) if the state can't use interest rates as a policy tool, because the higher costs are unaffordable, then options would become to offload the increased costs of borrowing into the private sector (auto-enrollment, mandatory purchases of gilts) which is a card to some extent already played. Or simply and more directly move to direct restrictions on lending. Neither of which looks particularly good, just another step to national insolvency. This reminds me a bit of the absurdity of saving for your pension while carrying a mortgage, when the yield on your pensions savings is lower than your mortgage costs.