Money printing, search for yield and the mirage of financial stability

By Jeremy Warner – The search for yield is evident in renewed investor appetite for “payment in kind notes”, a form of credit that gives the borrower the option to repay lenders by issuing additional debt.

Roughly a third of those who issued such debt in the run-up to the crisis ended up defaulting, yet this has failed to act as a deterrent. New issuance of these instruments rose by a third in the first three quarters of this year.

Unconventional monetary policy is meant to work on the “hair of the dog that bit you” principle.

By fighting a crisis caused by too much money with yet more money, the central bank hopes to restore the economy to a “normally” functioning machine, at which point saner voices are meant to take over and a more sustainable form of growth establishes itself. more>



Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s