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December 30, 2008

We Can't All Be Massive Keynesians at Once, Part XXXIV

A theme I keep harping on is that so many developed countries around being the world being Keynesians at once -– enacting massive  bond-finance stimulus programs -– doesn't come with inflation as the only possible consequences. There is also, for example, crowding out in a sovereign emerging debt markets.

An FT article today helps make the point:

Record volumes of government bonds from the industrialised nations – intended to reverse what could be the worst recession since the Great Depression – threaten to curb access to credit markets by emerging economies.

Analysts warn that emerging market borrowers could be crowded out of the credit markets by $3,000bn of government bonds expected to be issued by the big developed economies in 2009 – three times more than in 2008. The US alone is expected to issue about $2,000bn next year.

Nick Chamie, head of emerging markets research at RBC Capital Markets, said: “In simple terms, there will be more issuers fighting for a limited pool of capital.”

More here.

And here is a related graph from EconomPic:

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