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Like to like : non-sovereign entities can become insolvent, they have to pay their credit risk with the interest rate.

For sovereign entities, the policy takeaway from the ongoing failure of the euro is this : if you want interest rates to correlate with debt levels, then kneecap your central bank. The Fed has made it abundantly clear that it will find creative ways to print money, as much and as long as necessary. If it were to signal that it was no longer willing to accommodate debt-based stimulus, then buying US treasuries would suddenly become dangerous. And the interest rates would soar. Wouldn't that be nice?

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Thu Mar 14th, 2013 at 12:14:20 PM EST
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