01 and 0. 09 with the s & p 500 index and the bloomberg us aggregate bond index respectively since 1970. importantly, gold has often worked as a ‘ safe haven ’, a hedge against tail risk. 11 this is also well documented in the literature. 12 to mention but one familiar example, in 2022, a financially turbulent year, gold outperformed all the other major investible asset classes with the exception of cash, showing a return close to zero ( in dollars ) while everything else was deeply negative : specifically, global bonds lost 16 per cent, 13 and global equity around 14 per cent, 14 of their respective values. ( the increased demand for gold that i mentioned earlier is an obvious factor ). source : bloomberg data, annualised standard deviation of real returns in the period 1971 - 2022. additional statistics, in nominal terms, are provided by the world gold council ( link ). for a comprehensive review, see o ’ connor, f. a., lucey, b. m., batten, j. a. & baur, d. g. ( 2015 ), ‘ the financial economics of gold — a survey ’, international review of financial analysis, 41, 186 - 205. ssga, gold as a strategic asset class, march 2023. bis, what share for gold? on the interaction of gold and foreign exchange reserve returns, november 2020. see panfili, f., daini, f., potente, f., & reale, g. ( 2015 ). l ’ oro come ‘ safe haven asset ’? evidenze empiriche basate su un confronto fra diverse attivita finanziarie ( only in italian ) ; and baur, d. g. & mcdermott, t. k. ( 2010 ). is gold a safe haven? international evidence. journal of banking & finance, 34 ( 8 ), 1886 - 1898. bloomberg global aggregate bond index. msci world index. political risk is linked to tail financial risk, but has features of its own. a recent study by the imf15 investigates the reasons behind the steady rise in the share of gold holdings in official reserve assets since the global financial crisis, particularly in emerging and developing economies. 16 according to the study, reserve managers view gold as a hedge against economic and geopolitical risks ; as a result, gold shares increase with political uncertainty. in addition, reserve managers in emerging markets

original payment schedule, and those who cannot. if a lender believes itself to be unable to achieve this triage with sufficient accuracy, it may indeed seem rational for it to deal with adverse selection by over - use of repossession. because of the collateral damage to the economy, many specialist economists regard the rate of repossessions in the united states in the current crisis as socially excessive. in contrast to the americans, irish banks have traditionally been very slow to move to repossession. over the years, this may have reflected better information about their borrowers, allowing them to solve the adverse selection problem. it may also reflect the market structure : banks with a large market share will partly internalise, and take account of, the systemic damage caused by widespread unresolved debt distress and excessive repossessions. the current crisis, though, is on a scale that has challenged the irish banks ’ capacity to respond. their reluctance to provide deep or lasting loan modifications has protected them from adverse selection. but the lack of clarity about the consequences of accumulating arrears has likely contributed to moral hazard for the lender, as growing numbers of stressed borrowers decide for whatever reasons to deprioritise mortgage servicing. we have all heard the anecdotes about well - heeled borrowers flatly refusing to pay their mortgage instalments despite having plenty of money in a current account to do so, and still taking expensive holidays or buying new 132 reg cars. i don ’ t deny that there may be such people who feel that is possible to rationalise such behaviour ). who could endorse such behaviour? but does it really characterise the attitude of most arrears case? of course many arrears cases are characterised by absolute cash squeezes – where the household simply does not have the resources to maintain consumption above, say the minima set out by the insolvency service of ireland. there also seem ( on the basis of such limited survey evidence as exists 4 to be many other households who could continue to pay their mortgages but, for the moment, are not doing so. identifying these cases robustly can only be done on a loan - by - loan basis by the lenders as they seek to solve the adverse selection problem. but i suspect that most such households are not simply refusing to pay on a “ won ’ t pay : come - and - get - me - if - you - can ” strategic default basis