The Canary
Bill Fleckenstein on the UK bond auction failure (mentioned here at BMB the other day):
…I believe that as bad as the financial problem is, the economic problem is worse. I don’t see how the Treasury’s program and other facilities would alleviate the economic problem.
None of these maneuvers to plug the holes in the dike of the United States’ and the world’s financial systems will necessarily do all that much for the overall economy. Thus, as the pure financial crisis recedes from center stage, the economic crisis lies front and center.
As for the looming funding crisis, the third part of the three-baseball-game analogy I first explained in my Nov. 3 column, “Economy sinks as we save bankers.”
In a potential harbinger of the timing, a United Kingdom bond auction last Wednesday — worth a modest $2.5 billion in bonds — failed to find enough buyers. That, even as the Bank of England has embarked on quantitative easing, the polite name for debt monetization, or the conversion of government debt into money.
Perhaps it’s just noise, but perhaps it’s the canary in the coal mine. Sooner than predicted, we could see the funding crisis I expect governments to face as they try to finance debt.
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