the risk of yield chasing..............

 

As a banker and financial journalist, Bagehot observed that outbreaks of financial recklessness did not occur at random.  Rather, they tended to appear at times when money was easy and interest rates lot.  He expressed this insight in his own inimitable fashion: "John Bull can stand many things, but he cannot stand two percent."  When interest rates fell to such a low level, investors reacted to the loss of income by taking greater risks.  In modern language, they engaged in "yield chasing".  John Bull—that personification of English common sense—made his first appearance in Bagehot's writing in an article for the Inquirer published on 31 July 1852:

‘John Bull’, says someone, ‘can stand a great deal, but he cannot stand two per cent . . .’ Here the moral obligation arises. People won’t take 2 per cent; they won’t bear a loss of income. Instead of that dreadful event, they invest their careful savings in something impossible – a canal to Kamchatka, a railway to Watchet, a plan for animating the Dead Sea, a corporation for shipping skates to the Torrid Zone. A century or two ago, the Dutch burgomasters, of all people in the world, invented the most imaginative occupation. They speculated in impossible tulips.

-Edward Chancellor, The Price of Time: The Real Story of Interest