Hamish McRae: If the Bank of England ever buys equities, it'll be time to leave

There is a fine irony, is there not, in central banks buying equities? They have driven down the yields on government debt to such low levels that real yields in most major economies are now negative.

That leads into a debate about the effectiveness of the policy and even its morality: is it right to slash the value of pensions and corral savers into investments on which they are bound to lose money?

But if we savers are suffering from this policy, so too are central banks, for they have seen the return on their reserves savaged. Most central banks hold a mix of gold and foreign exchange in their reserves, and the foreign exchange element is largely in short-dated US treasury securities. Of course, gold yields nothing, while short-dated securities yielded something in nominal terms. That was the argument behind Gordon Brown's decision to sell most of our gold.

But now the hunt for yield is such that even central banks are desperately trying to diversify and global equities are the obvious choice. They have two advantages over treasuries: they offer a reasonable yield and are a sort of hedge against inflation if that is what the money-printing spree ends up causing.

So they are starting to buy. And it is not just the canny ones, such as the Swiss National Bank and the Bank of Israel that are doing so. In a survey by Central Banking Publications and the Royal Bank of Scotland, nearly a quarter of the 60 central banks polled either owned shares or planned to.

So what are the implications? An obvious one is that there is a new force underpinning global share values, an entirely new class of buyer. Another is that there is a new mechanism whereby money printing boosts share values and ought eventually to feed through into final demand. So this must be good for shares.

But a word of warning. Neither the US Federal Reserve nor the Bank of England have equity buying in their mandate. If, in the future, some chancellor (Ed Balls perhaps?) authorises the Bank to buy equities it would, on past form, be the moment to head for the door.