Chris Justham, Relationship manager for Seven Investment Management, joined Zak Mir and Tim Price on the Tip TV Finance Show to discuss the difference in monetary policy from the financial crash in 2008 to now, and how the central banks have failed to change their policies as the 7 years has passed.
Investors overly fixated on interest rates
Justham noted that there is so much noise from central banks concerning monetary policy, and investors have become over reliant on these messages. He continued that there was a 3-legged stool created to fix the crisis from 2008, and it involved further QE from central banks, and then banks to lend the additional money out to benefit the economy. However, banks couldn’t lend this extra cash as they needed to fix their balance sheets, which Justham believed to be the start of people becoming over reliant on monetary policy.
Ultra-low rates not the same in normal market conditions
Justham continued that 7 years on from the crash, the economy doesn’t need ultra-low interest rates which were an emergency policy when we are now back in normal market conditions.
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