The last decade has proved that governments do not operate at the behest of bond markets, as was once thought. Instead, bond markets operate with the consent of government, which can and will provide them with more or less debt to trade entirely at the will of government. This is a massive change in relationship. Fiscal rules pretend that this change has not happened.
Fiscal rules also pretend that government interest costs are set by the whim of markets. Again, over the last decade it has become absolutely apparent that this is not the case. So a fiscal rules is, again, misguided.
If all that’s true then why does the BoE own £800 billion of gilts? Why would anyone bother if there’s no problem selling bonds at an interest rate controlled by government?
Amongst a lot of strong competition, this could be the most bewilderingly moronic:
Have any of the fawning Spud-worshippers pointed out the rather impressive number of Gilt issues that are not trading at the coupon rate and asked him to explain why, if bond markets just do as they are told?
His analysis should also cover the issue of why so many Gilt issues now are index-linked. It suggests that the Government will not be able to inflate its way out of trouble
I wonder if anyone involved in that article’s nonsense has talked to the Zambians about how the bond markets are unimportant.