ASSET PRICES TO FALL?

Ambrose Evans-Pritchard reports that the Bank for International Settlements (BIS) is worried that the world has too much debt.

Since 2007, combined public and private debt in the the developed economies has jumped by 36 percentage points to 265pc of GDP.

"Global debt levels are dangerously high and central banks cannot keep the game going indefinitely."

An increase in interest rates by the US Federal Reserve could create an economic crisis.

BIS fears emerging market maelstrom as Fed tightens.

If the 'bubble' bursts, there could be a drop in the value of various 'assets' such as gold, shares (equities), bonds and houses.

Banks are worried?

Deutsche Bank plans to cut staff by 25pc



The above graph shows that currently the price of bonds, shares and property is above historical norms.

According to Deutsche Bank, there is the chance that profits or valuations will return to their historical norms.

If that happens, Deutsche reckons the average real return from equities over the next 10 years will be negative. 

The same is true for Treasury bonds, European corporate bonds and American residential property.

Read more: http://www.afr.com/