The Great Debate UK

from Commentaries:

The case for GDP bonds

Around the world, governments are struggling to drum up buyers for the mountain of bonds they need to sell. And that's especially true for big deficit, low savings countries like Britain and the United States.

The returns they are offering on conventional government bonds are low and there's the risk of inflation eating away at their value. Perhaps it is time for a different approach.

Rather than hiring investment banks to bamboozle the public into subscribing for unwanted conventional bonds, or cramming them down the throats of the banks as part of expanded reserve requirements, governments should consider issuing bonds linked to gross domestic product.

GDP bonds are not a new idea but few governments have issued them. Those that have don't make for a distinguished roll call, including as they do Bosnia Herzegovina, Bulgaria and Argentina, which swapped conventional bondholders into GDP bonds after its currency collapse in 2001.

from The Great Debate:

Fed sets out exit strategy

John Kemp Great Debate-- John Kemp is a Reuters columnist. The views expressed are his own --

Intense criticism of the Fed's role in the financial rescue program and the decision to triple its balance sheet, including monetizing a portion of the Treasury's debt, has forced the central bank to issue an unusual defense of its actions (http://www.federalreserve.gov/newsevents/press/monetary/20090323b.htm).

It attempts to placate critics by acknowledging the real risk of inflation, and marks the Fed's first attempt to set out an "exit strategy" for ending quantitative easing and other credit programs once the crisis is safely passed.

from The Great Debate:

How will the Fed get off its Tiger?

James Saft Great Debate -- James Saft is a Reuters columnist. The opinions expressed are his own --

The Federal Reserve and U.S. economy have two considerable risks now that quantitative easing is at hand: keeping the dollar from a disorderly decline and figuring out how to dismount from the tiger.

The Fed has cut interest rates to a range of zero to 0.25 percent and said it would use "all available tools" to get the economy growing again, including buying mortgage debt as well as exploring direct purchases of Treasuries.

  •