Home › 6a) Gold & Monetary Metals › 6a.) GoldCore › Quantitative Easing: A Boon or Curse?
Permanent link to this article: https://snbchf.com/2021/07/flood-quantitative-easing-boon-curse/
Donate to SNBCHF.com
Donate to SNBCHF.com Via Paypal or Bitcoin To Help Keep the Site Running
Please consider making a small donation to Snbchf.com. Thanks
Bitcoin wallet: bc1qa2h6hgd0xkuh7xh02jm5x25k6x8g7548ffaj3j
Receive a Daily Mail from this Blog
Live Currency Cross Rates
On Swiss National Bank
-
USD/CHF stays above 0.9100 nearing the highs since October
9 days ago -
SNB Sight Deposits: increased by 17.0 billion francs compared to the previous week
9 days ago -
Pound Sterling falls back as upbeat US Retail Sales strengthen US Dollar
9 days ago -
Canadian Dollar remains vulnerable after strong US Retail Sales
9 days ago -
2024-04-09 – Martin Schlegel: Interest rates and foreign exchange interventions: Achieving price stability in challenging times
15 days ago
Main SNB Background Info
-
SNB Sight Deposits: increased by 17.0 billion francs compared to the previous week
9 days ago -
The Secret History Of The Banking Crisis
2017-08-14 -
SNB Balance Sheet Now Over 100 percent GDP
2016-08-29 -
The relationship between CHF and gold
2016-07-23 -
CHF Price Movements: Correlations between CHF and the German Economy
2016-07-22
Featured and recent
-
Understanding Elliott Wave Theory and Investment Strategies – Andy Tanner and Bob Prechter
-
4-20-24 Candid Coffee – Open Season Episode
-
Habecks Geheimakten enthüllt!
-
Diese Aktien sind extrem günstig!
-
Bitcoin Price Prediction and the Future of Crypto – Robert Kiyosaki, Mark Moss
-
The DNA of Success: Habits of Millionaires Unveiled
-
Driver’s Licenses Waive Personal Responsibility and Contribute to Disorder on the Road
-
Chapter 4. Why the Classical Liberals Wanted Decentralization
-
Chapter 12. When It Comes to National Defense, It’s More than Size that Matters
-
Chapter 10. If California Secedes, What Happens to Locals Who Opposed Secession?
More from this category
- Driver’s Licenses Waive Personal Responsibility and Contribute to Disorder on the Road
24 Apr 2024
- Chapter 20. Sovereignty for Cities and Counties: Decentralizing the American Statesbal Sovereignty Is Important
24 Apr 2024
- Postscript: A Tale of Two Megastates: Why the EU Is Better (In Some Ways) than the US
24 Apr 2024
- Chapter 1. More Choices, More Freedom, Less Monopoly Power
24 Apr 2024
- Chapter 5. Secession as a Path to Self-Determination
24 Apr 2024
- Introduction: Universal Rights, Locally Enforced
24 Apr 2024
- Foreword by Carlo Lottieri
24 Apr 2024
- Chapter 13. If America Splits Up, What Happens to the Nukes?
24 Apr 2024
- Chapter 11. How Small Is Too Small?
24 Apr 2024
- Chapter 3. Why Regimes Prefer Big States and Centralized Power
24 Apr 2024
- Chapter 2. Political Anarchy Is How the West Got Rich
24 Apr 2024
- Chapter 6. Nationalism as National Liberation: Lessons from the End of the Cold War
24 Apr 2024
- Chapter 14. Why “One Man, One Vote” Doesn’t Work
24 Apr 2024
- Chapter 9. From Taxes to Trade, More Secession Means More Freedom
24 Apr 2024
- Chapter 4. Why the Classical Liberals Wanted Decentralization
24 Apr 2024
- Chapter 12. When It Comes to National Defense, It’s More than Size that Matters
24 Apr 2024
- Chapter 10. If California Secedes, What Happens to Locals Who Opposed Secession?
24 Apr 2024
- Chapter 7. A Brief History of Secession Plebiscites in Europe
24 Apr 2024
- Chapter 15. Democracy Doesn’t Work Unless It’s Done Locally
24 Apr 2024
- Chapter 8. Why the US Supports Secession for Africans, but Not for Americans
24 Apr 2024
Quantitative Easing: A Boon or Curse?
Published on July 24, 2021
Stephen Flood
My articles My videosMy books
Follow on:
Central banks’ massive Quantitative Easing (QE) programs have come under scrutiny many times since the central banks fired up the printing press and began quantitative easing programs en masse after the 2008-09 Great Financial Crisis.
However, the increase in central bank assets due to quantitative easing programs during the crisis pale in comparison to the QE programs during the Covid pandemic.
As economies recovered after the Great Financial Crisis many worried that consumer price inflation would rise rapidly due to the extra liquidity in the market. A fear that never materialized as many economies stayed well below central bank inflation targets.
Quantitative Easing Leading to Financial Crisis?
The question being asked now is have these programs led to financial mania?
This is how Peter Fisher, former executive vice president and manager of the System Open Market Account of the New York Federal Reserve, describes the effect of the action of the Fed in the PBS Frontline (U.S. based) program released on July 13. Mr. Fisher goes on to say that when he
The Frontline program does also have interviews with supporters of QE; “we’re lucky that the government was successful, or we could be living through a true depression”, stated Lev Menand, a former economic advisor to the Fed and the Treasury Department.
But the overall message of the program is that, “while well-intentioned, the Fed’s experiment has delivered mixed results over the years, some experts say in the documentary, with the biggest benefits going to Wall Street rather than Main Street, wealth inequity widening and the risk of inflation growing — over the past year, in particular. In addition, the Fed has insisted signs of inflation are temporary. However, has signaled it may taper quantitative easing and raise interest rates as early as 2023.”
Moreover, even investors that have greatly benefited from the Fed’s program. Such as Jeremy Grantham, spoke out against the unintended consequences of the massive QE programs;
Quantitative Easing Causing More Harm Than Cure?
Mr. Fisher describes QE as “pretty basic in medicine that our doctor may give us a drug, which, in a small punchy dose, for a brief period of time, might help us recover from whatever ails us … But that the same medicine, the same drug, taken in massive doses over long periods of time, might kill us or make us ill or have perverse side effects.”
…. Or the medicine intended to cure, or lessen the pain, could become an addiction. This is exactly what a report published on July 16th from the House of Lords, Economic Affairs Committee titled: Quantitative Easing: a Dangerous Addiction?
According to a Bloomberg article, penned by Mervyn King, a member of the committee which issued the report, the answer to this pointed question as the title is “Yes”. Mr. King goes on to say that the report has four important points.
The first point of the report is for central banks to not get locked in the mindset that all the rise in inflation is transitory. Although he agrees that some components will be due to base effects he warns central banks that “the lack of concern that has characterized central-bank statements — at least until the last few days — fuels the perception that policy makers are stuck with their “lower for longer” mindset. This matters, because if policy falls behind the curve, the cost of tackling a rise in inflation will be higher than it would be under a forward-looking, preemptive approach.”
The second point of the report is that: “QE is not a cure-all. QE has become a universal remedy for almost any macroeconomic setback. But only certain shocks merit a monetary-policy response. Moreover, the explanations provided by central banks to justify the scale of QE in 2020 changed over the course of the year. It failed to distinguish between shocks that justified a monetary response and those that didn’t.”
The third point of the report is that: “QE poses risks for central-bank independence. QE has made it easier for governments to finance exceptionally large budget deficits in the extraordinary circumstances of Covid-19. But when the central banks reduce this support, will they come under pressure to help finance ongoing budget deficits or to keep short-term interest rates close to zero? It’s possible they will.”
And the fourth point of the report is that: Central banks need to have an exit plan. QE tends to be deployed in response to bad news, but isn’t reversed when the bad news ends. Mr. King goes on to say that
Follow on:
No related photos.
Tags: Business,central-banks,Commentary,Economics,economy,Featured,Federal Reserve,federal-reserve,Finance,Financial crisis,inflation,Interest rates,Monetary,Monetary Policy,money,News,newsletter,Quantitative Easing