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OPINION

Policy, risk and you

Policy, risk and you
February 5, 2013
Policy, risk and you

The Bank of England wants us to take more risk, because doing so is one of the ways in which it hopes that loose monetary policy will boost the economy. In explaining why it has undertaken quantitative easing (QE), the Bank says it hopes that investors will use the cash they get from selling gilts "to purchase other assets, such as corporate bonds and shares". Similarly, one traditional route through which low interest rates are intended to stimulate the economy is that they encourage investors to switch out of safe cash and into equities or corporate bonds, thus reducing companies' cost of capital and encouraging them to spend more.

In this sense, encouraging risk-taking isn't a bug of policy, but a feature.

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