Joachim, thanks for your insights on Switzerland! What you highlight in point #1 is really an extension of the agency costs I highlight in my article. I would expect governments to step up regulations that require banks, pension funds, etc to purchase more government bonds. In fact, this is the reason I included the U.S. government's new myIRA program which channels retirement assets into US government bonds. It's a shame that pension fund beneficiaries are forced to live with the ultimate consequences of these foolish actions. For politicians and government bureaucrats, it's a classic case of "my gain, your pain."

Regarding your point #2, I beg to differ. I believe at some point the market cannot bear the purchase of the incremental bonds needed to finance widening deficits. (I suspect you agree...) At some point, the government may decide to simply monetize deficits... but if that comes to pass, I believe they will lose the market. Two things I try to watch closely are: a) the relationship of bonds issued by the government to bonds purchased by the central bank; and b) the relationship between a country's CPI and monetary expansion. Regarding a), when bonds are monetized faster than they are issued, I expect monetary-induced bubbles to form. We can see this quite clearly with Japanese stocks since Abenomics policy was enacted in 2013. In the ten years ending in 2012, the BOJ only purchased about 25% of bonds issued. In the 2013 - 2015 period of Abenomics, the BOJ purchased about 5x the bonds issued. Since Abenomics was implemented in 2013, we see Japan 10-yr yields decline from +0.65% to roughly -0.04% today. We also see the Nikkei rise from roughly 9,000 to 17,000 today.

Regarding b), when people lose faith in a currency, it tends to lose value faster than the government prints it, so consumer price inflation tends to accelerate faster than M0 growth. We see this in periods of macro-crises, perhaps most famously in the Germany Hyperinflation of 1920's. Unfortunately, on an a priori basis, no one can predict definitively when the tipping point occurs, but I think these tools can help us observe it while it is happening.