As for Alice’s viewpoint, I have a lot of sympathy for it. As you indicate, inflation is what one should expect from the money flooding into the system from central banks. But one should also expect risk-taking from interest rates that are being cut too aggressively.

Have you seen the talk about leveraged ETFs?. I am hearing chatter on the back channel about how reblancing portfolios in order to accommodate these ETF positions is creating wild swings at market open and market close.

This type of leverage (now 3x as well) is a direct result of easy money. Interest rates are too low and this has spurred risk taking. All of this will end very badly.

And your fear of banks’ insolvency concerns dissolving are well placed. The monetary stewards are trying to increase risk appetite in a way that is dangerous.

The immediate risk is a run on Sterling, but run to where? Gold? The central banks behind all the major currencies are cutting rates.

The long term risk is high inflation but this may not happen until next year. Today’s IEA long-term prediction for oil predicts we”ll see $100 oil again but doesn’t attempt to pick a year.

My fear is that banks may suddenly overcome their fear of insolvency, open the floodgates, and release all that cheap money that’s been pooling up on their balance sheets. Inflation will then shoot up in a short period of time. Is this even plausible? Will the BoE be able to react quickly enough? And what effect would such huge swings in interest rate have on an economy?