Central banks as market makers: an incredibly bad idea

Reuters reported that Jose Vinals, director of the IMF’s capital markets department, said last week that central banks may need to become market makers to counteract very low liquidity in fixed income markets. Wait a minute? Did he really say that? Isn’t that about the worst idea ever? No really, he said that. According to Reuters, “the only thing that can be done at that time is that central banks should become again market makers of last resort.”

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