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QE Will Make Everything Worse

It is finally here. Everyone had been waiting for it for a long time and now its size is far beyond what people had expected. The ECB will implement a quantitative easing (QE) program and start buying €60bn ($68bn) worth of assets every month from March until at least September 2016. That is a total package of €1.1trn ($1.3trn) and it is about double the size of what the market had expected before. QE is widely believed to be the magic wand that solves every problem a sluggish economy may face. By printing money it will lift inflation and inflation expectations. It will also lead to lower financing costs for corporates as investors start searching for a yield that sovereign bonds cannot offer anymore, hence pushing down yields for corporate bonds. This and a depreciating currency will then spur GDP growth. Mission accomplished.

I have never bought these arguments. In… Read More …