He made an interesting comment. It was that his employer now holds no gilts in its pension fund. It has invested in much riskier corporate debt instead. This, as he put it, was being done in a ‘chase for yield’ and a need to ‘match the liabilities’. In other words, the trustees have abandoned caution in an attempt to match income to their obligations. Short term accounting demands have made them leave prudence behind.
But, as he noted, this explains where the debt is in the UK economy. In 2008 it was on bank balance sheets, and they failed.
This time regulation will have reduced bank exposure so it is on pension fund balance sheets instead.
The aim of QE was to get people out of gilts and into corporate bonds. That’s the damn point.
As is explained to him in the comments:
QE has had the impact of sending investors such as pension funds further down the rate curve, and ultimately into higher rated corporate debt. This is not the trustees ‘abandoning caution’ as you term it, but because of an obligation, mandated by legislation, that certain liabilities need to be matched. (Something that Gilt investments are not able to do because their yields are so low, because of QE).
So, QE has created risk fir the next financial crisis
As I said it would in 2010
All you have done is confirm that
Well, that and a blasé indifference
That’s the QE that Ritchie says should be our major government funding mechanism with MMT, right?