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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum

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To: bart13 who wrote (108623)	11/27/2014 11:06:53 AM
From: smh	Read Replies (1) of 219962

bart, I would be interested in your comment on this idea, which I posted elsewhere. Saville had an interesting discussion in his NL the other day addressing the issue of governments' ability to service their debt in the face of rising interest rates. The Fed (and presumably most other central banks) return their profits to the government. Thus, any interest paid on government debt owned by the Fed comes back to the government, making it essentially interest free debt. Using Japan as the best example, the BOJ currently owns about 24% and is buying government debt twice as fast as the government is issuing it. By 2019 half of Japan's debt could be virtually interest free. Furthermore, higher interest rates apply only to new debt. So maybe rising interest rates do not end the shell game. Seems to me that, to the extent that the central bank buys the debt, this is the same as the government simply printing and spending debt free money! Oh!, almost forgot, except that the primary dealer banks would not get their "fees" and the Fed wouldn't get to skim the pot. smh

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