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Russell Napier On The Rise And Fall Of The Age Of Debt And China’s Choice Between Deflation and Devaluation

Forward Guidance

NOTE

Utilizing Savings Institutions for Government Bonds

The shift in monetary policy in Japan involves using savings institutions and the commercial banking system to manage the yield curve, similar to what America did during wartime. This approach avoids using the central bank's balance sheet. This strategy might also be adopted in the US if faced with a significant spike in bond yields. In such a scenario, the US could potentially compel savings institutions to purchase government bonds to manage spending instead of reducing government expenses. This tactic could become necessary if bond yields reach a level that hinders the government's functioning. Although the US might face more political obstacles in implementing this strategy compared to Japan, the possibility remains.

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