The Birth of Macro_Prudential Policy

This week the UK Treasury will release details of the embryonic macro-prudential policy - a policy designed to prevent the asset price bubbles that have plagued the UK at regular intervals over the years. Robert Peston has a blog on this here and portrays it as a victory for the Bank of England. We will learn more in the coming days and weeks of the technical detail behind macro-prudential policy.

I was reminded reading Robert’s blog of the policy prescription put forward by John Calverley in his most recent book “When Bubbles Burst” - will the Macro Prudential Policy Committee operate in a similar vein to an Asset Valuation Committee?

“John Calverley floats the idea of an independent Asset Valuation Committee whose job would be to improve the flow of financial information available to stock market and property investors, alerting us to when asset prices were either dangerously over-valued or under-priced in the market and perhaps giving people a stronger base on which to reallocate their portfolios and achieve better long term returns. An Asset Valuation Committee might act as a set of Wise Elders to the herd many of whom have spent much of the last two decades stampeding from one asset class to another – from internet shares to buy-to-let property – without stopping to calculate in the cold light of day the risks of the decisions they have taken.”