Even Central Bankers Now Admit QE Doesn’t Work

Even As European Central Bank Is Set to Unleash a Massive Round of Quantitative Easing, Central Bank Heads Admit QE Doesn’t Work

The former head of the Bank of England – Mervyn King – said today that more QE will not help the economy:

We have had the biggest monetary stimulus that the world must have ever seen, and we still have not solved the problem of weak demand. The idea that monetary stimulus after six years … is the answer doesn’t seem (right) to me.

Also today, William White – the brilliant economist who called the 2008 crisis well ahead of time, who is head of the OECD’s Review Committee and former chief economist for BIS (the central banks’ central bank)  slammed QE:

QE is not going to help at all. Europe has far greater reliance than the US on small and medium-sized companies (SMEs) and they get their money from banks, not from the bond market.

***

Even after the stress tests the banks are still in ‘hunkering down mode’. They are not lending to small firms for a variety of reasons. The interest rate differential is still going up.

***

Mr White said QE is a disguised form of competitive devaluation. “The Japanese are now doing it as well but nobody can complain because the US started it,” he said.

“There is a significant risk that this is going to end badly because the Bank of Japan is funding 40pc of all government spending. This could end in high inflation, perhaps even hyperinflation.

“The emerging markets got on the bandwagon by resisting upward pressure on their currencies and building up enormous foreign exchange reserves. The wrinkle this time is that corporations in these countries – especially in Asia and Latin America – have borrowed $6 trillion in US dollars, often through offshore centres. That is going to create a huge currency mismatch problem as US rates rise and the dollar goes back up.”

***

He deplores the rush to QE as an “unthinking fashion”. Those who argue that the US and the UK are growing faster than Europe because they carried out QE early are confusing “correlation with causality”. The Anglo-Saxon pioneers have yet to pay the price. “It ain’t over until the fat lady sings. There are serious side-effects building up and we don’t know what will happen when they try to reverse what they have done.”

The painful irony is that central banks may have brought about exactly what they most feared by trying to keep growth buoyant at all costs, he argues, and not allowing productivity gains to drive down prices gently as occurred in episodes of the 19th century. “They have created so much debt that they may have turned a good deflation into a bad deflation after all.”

The former long-term head of the Federal Reserve (Alan Greenspan) says that QE has failed to help the economy.

The original inventor of QE agrees.

Numerous academic studies confirm this. And see this.

Indeed, many high-level economists – including Federal Reserve economists and the main architect of Japan’s QE program – now say that QE may cause deflation and harms the economy in the long run.

Economists also note that QE helps the rich … but hurts the little guy. QE is one of the main causes of inequality (and see this and this). And economists now admit that runaway inequality cripples the economy. So QE indirectly hurts the economy by fueling runaway inequality.

A high-level Federal Reserve official says QE is “the greatest backdoor Wall Street bailout of all time”. And the “Godfather” of Japan’s monetary policy admits that it “is a Ponzi game”.

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  • Steven

    QE is such an enormous rip off I can only conclude the reason it hasn’t
    provoked a strong political reaction is that people don’t understand (by
    design?) what’s going on or don’t want a fight with the powers that be.
    On the one hand, people are told they should ‘save’ (i.e. turn their
    money over to Wall Street and the banks) to be financially responsible.
    But the people to whom they entrust those savings don’t invest; they
    gamble. They make loans and invest just for the fees and commissions
    they can collect. And when those loans and investments go bust to no
    one’s great surprise, they turn around and swap them for debt backed by
    the ‘full faith and credit’ of the peoples’ (sic) governments. Western
    politicians play essentially the same game, swapping the revenue from
    taxing their wealthiest – and hence politically most powerful – citizens
    for funding from debt creation.

    The economist Hyman Minsky
    wrote “Any unit (i.e. essentially anyone who can extend or receive
    credit -VoR) can create money. The problem is getting it accepted.” So
    when the banks and Wall Street create their ‘toxic waste’ and then
    eventually pawn it off on the government when they can no longer find a
    greater fool in the financial markets, how is this any different from
    ‘printing’ money? This whole process of getting money from the lender
    of last resort (really future generations, not the Fed) has gotten so
    easy
    banks and other financial institutions are increasingly finding retail
    customers not worth the trouble. Their business plan seems to be: rob
    them of a return on their savings and investment now; take the rest
    later.

  • December 27, 2014 Every major bank to receive survival kits – What do they know that we do not know?

    (Story by Susan Duclos, republished from AllNewsPipeline com, with additional editing by Natural News.) Why would every major bank need survival kits for all their employees? Why is the US government prepared to spend up to $200,000 on survival kits for bank employees at Bank of America, American Express Bank, BMO Financial Corp., Capitol One Financial Corporation, Citigroup, Inc., JPMorgan Chase, and Wells Fargo, just to name a few? What do they know that we do not know?

    Perhaps they are preparing for bank runs and employees to be forced to shelter in place?

    http://www.naturalnews.com/048113_survival_kits_banks_federal_government.html

    https://www.youtube.com/watch?v=zFEW-qytIfI#t=20

  • Tom kauser

    It works! If you want to live off the income of the producer and hoard the fruits of his labor from him for 3 months or 30 years? It works if you gain access to the producers income before he creates it and schedule a pay back scheme to give him just enough to grow but not escape?
    than you convert his money into an interest bearing form and ship it out to southern Europe and other none US countries? And than you collect interest payments which should have went to social security and laugh at how dumb THE YANKS REALLY BEES

  • Tom kauser

    Its like evolution! For billion or thousands of years something was happening here that wasn’t exactly clear? Than Darwin came along and now everything is new and different. Explained and tamed?
    For 101+YEARS a central bank has operated to do exactly what QE (new and different) has just been doing. Namelessly controlling the economy thru the bond market and now starting tomorrow to sell Euros to the ECB for dollars to be used to pay banks interest on free reserves and start a fresh war with Russia?

  • On the one hand, people are told they should ‘save’ (i.e. turn their
    money over to Wall Street and the banks) to be financially responsible.
    But the people to whom they entrust those savings don’t invest; they
    gamble. They make loans and invest just for the fees and commissions

    http://chungcuhh1linhdam.tin.vn/