We are nearing a point of no return. The Japanese central bank, for instance, already owns over a third of all outstanding public debt. And Japan is no exception. In Europe, a similar tendency exists. Last week, the Bank of Japan decided to cap the interest rate on 10-year government bonds at no more than 0%. That implies that the Bank of Japan, every time interest rates rise above 0%, will continue buying Japanese government bonds. Until the central banks owns all outstanding government debt. And then what? What will happen when central banks own all public debt?

The “Bond Vigilantes”


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