The supply and demand for safe assets

Safe assets are demanded as stores of value (to smooth consumption inter-temporally) and collateral facilitate credit intra-temporally). Some supplied publicly (government bonds) some privately (asset-backed securities). Private heterogeneous in quality, information about their quality reduces safety properties. We show that government bonds discourage both production (crowding quantity out) in) private assets. Hence, the optimal supply need to take into account dual roles impact on informational content