Quantative Queasing

The Fed has been buying up corporate bonds for several months, but the Chairman, Ben Bernanke has so far resisted calls to buy US government debt. Does he know something that Mervyn King doesn't?

When asked, Ben Bernanke says he has no ideological objection to buying government debt - he simply thinks that right now, it's more effective to tackle the corporate credit shortage directly.

There are several reasons the Bank can't follow his lead. One is simply that the US corporate bond market is much, much bigger relative to the size of the economy than ours is.

If the Bank of England tried to buy £75bn-worth of corporate bonds it would find itself buying up roughly the entire market. It would then be in the uncomfortable position of being the sole purchaser of the debt of some of Britain's biggest companies...

Our central bank is also concerned about taking too much corporate risk onto its balance sheet. That doesn't seem to be much of a worry to the Fed (though some at Threadneedle Street wonder why not).

Stephanie Flanders explaing why the Bank of England is buying Gilts (government debt).