A theme I keep harping on is that so many developed countries around being the world being Keynesians at once -â€“ enacting massive bond-finance stimulus programs -â€“ 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 â€“ intended to reverse what could be the worst recession since the Great Depression â€“ 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 â€“ 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: â€œIn simple terms, there will be more issuers fighting for a limited pool of capital.â€
And here is a related graph from EconomPic: