Central Banks; By becoming market makers of last resort, policymakers are pumping up leverage and risk. Leverage 100 times

Central banks may be accidentally subsidizing government borrowing through their efforts to prevent a repeat of past market blowups, and policymakers are starting to worry that anticrisis lending facilities could even be interfering with their own monetary policy.

The source of the problem is the switch from central banks being the lender of last resort to, in 2008 and 2020, also being market makers of last resort, ensuring corporate—and government—debt markets keep functioning.

During a crisis, support is often essential to prevent a downward spiral that destroys the financial system. But backstopping markets removes a key risk and encourages more borrowing—especially for the hedge funds that now own trillions of dollars of U.S. Treasurys.

The scale is extraordinary: The Dallas Fed estimates hedge funds ended last year with $2.4 trillion of Treasurys, up from $600 billion a decade earlier. 

Because the profits on each trade are tiny, hedge funds have to leverage as much as 100 times to get worthwhile returns, creating new risks.

Huw Pill, the Bank of England’s chief economist, worries that the reassurance central-bank policy provides bleeds into monetary policy by boosting borrowing. 

James Mackintosh Wall Street Journal  Aug. 15, 2026

https://www.wsj.com/economy/central-banking/central-banks-are-stuck-in-a-rinse-and-repeat-cycle-of-crises-47da47e9

Räntan (A) är vad som behövs för att stoppa inflationen. 

Räntan (B) är den som gör att bostadsmarknaden kollapsar.

Om A är större än B har vi ett stort problem.

The interest rate (A) is what is needed to stop inflation.

The interest rate (B) is the one that causes the housing market to collapse.

If A is higher than B, we have a big problem.

https://englundmacro.blogspot.com/2022/05/englunds-lag-3-inflation-and-housing.html