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July 9, 2018 | Nightmare on Main Street: Central Banks Reaching for Yield Too

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

When willfully blind, over-confident central bankers run monetary policy to serve their greed-engrossed-bank owners at all costs, prudence is extinguished and madness ensues. We are there and we are all vulnerable in the fallout.

While central banks, like pensions, have historically and wisely focused on capital preservation above all other goals, today both are running a doomed race to overcome capital deficits by ramping up the likelihood of capital loss.  See Central banks are ramping up their risk taking:

The days of plain old bonds and gold are over as central banks bet some of their trillions of dollars of foreign reserves on mortgage-backed securities, corporate debt, equities and emerging-market debt.

“Central bank reserve managers typically wake up in the morning figuring out how to avoid losing money,” said Alex Millar, head of EMEA sovereign and institutional sales at Invesco Ltd. But now, “the requirement for return is creeping up.”

Government-backed agencies have traditionally focused on preserving capital. However, with some government-bond yields having slumped below zero, generating a return has become a bigger priority, according to a survey of 62 central banks carried out by Invesco.

Government-backed agencies have traditionally focused on preserving capital. However, with some government-bond yields having slumped below zero, generating a return has become a bigger priority, according to a survey of 62 central banks carried out by Invesco.

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July 9th, 2018

Posted In: Juggling Dynamite

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