August 12, 2016
Sir, I refer to Gillian Tett’s discussion of “The bizarre world of negative rates”, August 12. As Ms. Tett does not refer to the obvious distortions in the allocation of credit to the real economy risk weighted capital requirements for banks and other regulations cause, I can only assume she is following some standing instruction of not to do so.
Because she must know that, if a bank wanted to “move funds from low-yielding assets, such as [sovereign or highly rated private] bonds or cash, into more productive investments that could produce better returns and growth”, then it is required to hold more of that equity that expects high returns, or then it can pay out less dividends... or bonuses.
And it will get even worse, since statism imposed via regulations is rampant. Only yesterday Robin Wigglesworth in Short View wrote: “New rules slapped on the US money market fund industry… are set to come fully into effect in October. The changes have spurred a gradual investor exodus from the funds, and the conversion of ‘prime’ MMFs which invest into corporate debt into ones that invest only in Treasuries (which are less affected by the new regulations).”