Feed­back loops fac­tored in

Financial Times Middle East - - Letters -

Sir, Gillian Tett (March 17), claims that “ac­count­ing rules and sol­vency reg­u­la­tion” have forced in­sur­ers to match as­sets to li­a­bil­i­ties. The same pres­sures ap­ply to pen­sion schemes with the com­bi­na­tion of the Pen­sions Reg­u­la­tor im­plic­itly urg­ing schemes to in­crease their li­a­bil­ity hedg­ing lev­els at the same time as the Bank of England is also buy­ing gilts via quan­ti­ta­tive eas­ing.

One would have to be blind, or per­haps the gover­nor of the Bank of England, not to recog­nise that this is the equiv­a­lent of a short squeeze in the gilt mar­ket. Surely most econ­o­mists — no doubt a ho­moge­nous tribe wor­thy of study by an­thro­pol­o­gists — have fac­tored this “bizarre, self-re­in­forc­ing feed­back loop” into their think­ing. Phil Irvine Chatham, Kent, UK

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