The answer to question 17.1 implies the above. I was a bit surprised to read this, particularly in light of the failure of the conventional gilt auction this week! Any comments, anybody? Are conventional gilts really more marketable than index-linked gilts? If so, why?
Issues of inflation proof bonds are generally small and so the depth of the market is not great I wouldn't get too worked up about the failure to cover last week's gilt auction, the problems will come a year or so down the line when the banks' liabilities land up on the government's books
I shouldn't think the Government will be too worried, though, having depleted the value of those liabilities by "successfully" increasing inflation through its expansionary policies. Will Joe Public be hoodwinked?
The reality is the government is desperate to cause inflation, but is impotent to do so at the moment due to our staggering indebtedness. Broad monetary destruction is occuring faster than narrow monetary creation
