It's The Stupid Economy

[unixronin]

So as widely reported, the US Government is planning to monetize debt to the tune of as much as a trillion dollars, funding it with bills still wet from the printing press.  The UK apparently has the same idea.

Except, it’s not working.

Brown’s government aims to sell a record 146.4 billion pounds of debt this fiscal year and as much as 147.9 billion pounds in 2010 as he tries to pull Europe’s second-largest economy out of its worst recession since 1980.

There’s just one problem.  Investors aren’t biting.  They bid on only £1.63 billion of the first £1.75 billion offering.  That doesn’t bode well for future offerings.

The DMO said as recently as December there was a possibility of a failed auction.  “We are in a very different world than we were six months or a year ago,” Robert Stheeman, chief executive officer for the agency, said in an interview.

No!  Really?

The UK Treasury has apparently authorized the Bank of England to print up to £150 billion to buy up debt.  Germany plans to sell €346 billion of bonds, while US bond issues will approach $2.5 trillion.

One wonders how many buyers there will be.  But I really have to wonder about this part:  When you issue bonds to secure funding, then print money to buy them from yourself with, have you actually accomplished anything at all in the real world except to dilute the money supply and end up with a larger slice of the diluted pie?  Or is that considered sufficient?

Comments

[ithildae.livejournal.com]

The CDS's are worthless. (They started because the regulators required anything counted as an asset to be insured.) The MBS's and CDO's actually have a value. The problem is that some, small part of those collected assets are poisoned. The poisoned part needs to be pried loose, and then they are worth something. (Potentially lots.) The best computers the banks have available to them cannot identify the poisoned parts. It is a risk (and a big one) to have them. The only reliable way to find out if it is poisoned, it to taste it, i.e. hold it when it matures.