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> http://tinyurl.com/kyfdaru
- How the Fed Let the World Blow Up in 2008, Matthew O’Brien, Atlantic