As the P³ keeps telling us in one of those moments of Sagacity³? People keep buying gilts at current interest rates therefore Green Bonds at 1% will do really well?
What’s more, the suggestion that Bailey, only weeks into the job, would have sat down with Rishi Sunak, the Chancellor, and said “don’t worry about the money for pandemic spending; we’ll happily finance the lot”, is plainly ridiculous.
The reality is that he was forced into ordering another splurge of asset purchases by a buyers’ strike in the gilts market. If unaddressed, it could easily have caused the whole monetary system to freeze up. By the same token, however, you have to ask yourself why investors were refusing to buy. It was because they had realised how costly lockdown was likely to prove; without the Bank of England as buyer of last resort, the Government would have struggled to finance it.
Never reason from a manipulated price……