In the words of Woodford: “Fiscal dominance manifests itself through pressure on the central bank to use monetary policy to maintain the market value of government debt.”[2] The main pillar of the fiscal theory rests on the fact that bonds are claims to nominal payoffs.
Still, we consider that the reactivation of the ABS market and the associated reduction in the use of self-originated ABS would be ultimately the only way forward in this context. Whither Interest rates are currently at historically low levels, reflecting rapid and deep cuts between the autumn of 2008 and the spring of 2009.