Trying too hard to unstick interest rates, or doing so too quickly, also runs the risk of making a difficult situation worse. It runs 1937 risk. That is one reason why the glue holding interest rates to their floor has remained so strong. And it is why I feel no immediate need to loosen that glue. BIS central bankers’ speeches  11  References Barro, R (2005), ‘Rare Events and the Equity Premium’, NBER Working Paper No 11310, available here: http://www.nber.org/papers/w11310. Bernanke, B (2005), ‘The Global Savings Glut and US Current Account Deficit’, speech given at the Virginia Association of Economists, available at: http://www.federalreserve.gov/ boarddocs/speeches/2005/200503102/. Bunn, P and Rostom, M (forthcoming), ‘Household debt and spending in the United Kingdom’, Bank of England Working Paper. Caballero, R and Farhi, E (2014), ‘On the role of safe asset shortages in secular stagnation’, Chapter 9 in the VoxEU e-book ‘Secular Stagnation: Facts, Causes and Cures’ available here: http://www.voxeu.org/sites/default/files/Vox_secular_stagnation.pdf. Cogley, T and Sargent, T (2005), ‘The conquest of US inflation: Learning and robustness to model uncertainty’, Review of Economic Dynamics No 8 p528–563. Evans, C, Fisher, J, Gourio, F and Krane, S (2015), ‘Risk Management for Monetary Policy Near the Zero Lower Bound’, Brooking Papers on Economic Activity, available at: http://www.brookings.edu/~/media/Projects/BPEA/Spring-2015/2015a_evans.pdf. Friedman, M and Schwartz, A (1963), ‘A Monetary History of the United States, 1867–1960’, ISBN: 9780691003542. Galbraith, J (1954), ‘The Great Crash 1929’, ISBN: 978-0141038254. Gigerenzer, G (2004), ‘Dread Risk, September 11, and Fatal Traffic Accidents’, Psychological Science Vol 15 No 4.

The resultant oversupply of space contributed to one of the most severe downturns that the commercial property industry has ever seen. Since then, other asset classes have outperformed commercial property in most years. Many institutional investors have responded by continuing to reduce their property holdings. Property companies have suffered; we have seen some high profile failures and reschedulings. The banks have suffered very sizeable losses on commercial property. Construction companies and associated professions such as architects and designers have suffered from the reduced workload on commercial property. And we must not forget the  BIS Review 11/1997  -2-  valuing and surveying professions; the upturn in insolvency-related work was not sufficient to offset lower turnover and the corresponding heavy pressure on fees. 6 Possibly the only ones to benefit from the downturn were tenants fortunate enough to sign new leases in an environment of falling rents. The modest extent of subsequent development has probably meant that even these ‘beneficiaries’ have had a more limited choice of accommodation. 7 Other factors have also made the market very challenging, especially for investors and lenders. These have included the speed of building obsolescence and growing pressure on companies to manage property resources more effectively. Several initiatives aimed at enhancing the market’s efficiency and attractiveness made little headway in the first half of the 1990s. These included efforts to enhance liquidity, to develop property derivatives, and to improve information on the very sizeable part of the market that is not ‘prime’.