Central Banks and Government Spending

There's a room where the light won't find you
Holding hands while
The walls come tumbling down
When they do, I'll be right behind you
--Tears for Fears

Interesting statement at the end of this screed: "Central banks exist to make it easier for insolvent governments to borrow money."

In ZIRP (zero interest rate policy) or NIRP (negative interest rate policy) regimes, financial repression prompts investors to reach for yield. This permits the US government, already $17 trillion in the hole, to sell even more Treasury debt with uber low coupons. In an unhampered interest rate environment, the cost of selling that debt would be much higher.

Of course, it also helps that the Fed, thru its QE programs, happens to the biggest buyer of US debt as well.

Much of this Ponzi-esque silliness would cease if investors took the view that buying sovereign debt is essentially sanctioning the use of force on others. Viewed thru this ethical lens, sovereign debt should not be bought, because those who do are contracting with government agents to force people into conditions of involuntary servitude.

Until more people decide not to play, central banks enable governments to borrow and spend much more than the could otherwise.