Lesson 6 of 8 · 4 min

The easy-money regime

Why a long stretch of suppressed real rates quietly raises trust risk.

Christopher Leonard's reporting on the Federal Reserve traces how a long stretch of post-2008 balance-sheet expansion changed the price of risk. When the policy rate is held below inflation for years, capital is pushed into longer-duration and lower-quality assets in search of yield.

The mechanical consequence is that a portfolio's recent returns increasingly reflect the regime, not the underlying cash flows. When the regime flips — as it did in 2022 — those returns reverse, often faster than the trustee can rebalance.

A trust that ignores the regime is not neutral; it has implicitly bet that the regime continues. The literacy work is to name that bet, size it, and decide deliberately whether to keep it.

Self-check

3 quick questions

Q1. Sustained negative real rates push capital toward…
Q2. What happens to those positions when the regime tightens quickly?
Q3. What is the prudent posture for a trust IPS?

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