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Bond Market Dynamics
- Pension funds are the primary buyers of bonds, needing their fixed income properties.
- Central banks have become major bond buyers, creating a risky situation of governments lending to themselves.
Decision-Makers' Deflationary Aims
- Decision-makers desire deflation by curbing consumer spending.
- They aim to avoid a scenario where people overextend themselves financially, leading to a potential bankruptcy cycle.
Stagflation vs. Secular Deflation
- Stagflation is unlikely due to secular deflationary trends like technology and demographics.
- However, nominal debt staying constant while income decreases is dangerous for borrowers.