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Redwood fears easing will lead to gilt bubble

Conservative MP and former Treasury Minister John Redwood has warned that the Bank of England’s quantitative easing programme could result in a bubble in the gilt market.

In a blog on his website, he says: “My worry is that on both sides of the Atlantic, the governments are trying this at the same time as running colossal government deficits and issuing huge quantities of bonds to pay for them. Markets are being told that buying different Government bonds is a ‘flight to quality’ which can never be criticised. Those who think this have not read their history books.”

He adds that in the past, countries have defaulted on their public debts while the UK and US have often inflated their way out of the “full rigour” of repayments, paying lenders back in depreciated dollars or pounds.

He says: “Even if this time round, they do prevent a return of high inflation and meet all the repayments, it is still possible to lose money from a ‘flight to quality’ if you buy a long bond on too low a rate of interest.

“There can be bubbles in gilt-edged securities as well as in properties and private sector shares. One of the problems that the Japanese encountered when trying money printing in the 1990s was deciding how quickly to withdraw the cash once it seemed to be working to avoid triggering a great inflation. They also discovered that if you did not first mend the banks, it was difficult for anything else to work.


What would your father say?

So at last the world has a group who are to be more despised than politicians. Sleaze was the word that was used to describe the sort of behaviour that involved politicians using their position to enjoy an upmarket lifestyle or to line their own pockets with what we now see as been relatively small amounts of cash.

Defaqto puts critical score focus on quality

Defaqto is reviewing its critical-illness scoring system to focus on the quality of products offered rather than the number of illnesses they cover.Life and protection principal consultant Ben Heffer says the rating firm is working with the industry to make the Aequos database more qualitative than quantitative. He says the move comes in response to […]

NU scheme aims to help graduates become advisers

Norwich Union has set up a new adviser training programme in a bid to encourage more graduates to take up a career in financial advice.The firm says its future adviser programme is designed to attract graduates at a time when the challenges of the retail distribution review could potentially see the number of advisers fall […]

2016 Global Survey of Individual Investors: How is investor behaviour rewriting the job description for financial professionals?

Trapped between expectations for near double-digit returns and strong apprehensions about investing in persistently volatile markets, investors worldwide are of the opinion that professional financial advice is worth the fee. But even though they believe individuals who work with a financial professional are more likely to achieve their goals, investors have a clear vision of […]


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