Quantitative Easing, people keep declaring it will help the economy, but the truth is it is causing damage to the economy. As Dawn J Bennett has been saying for a while now – quantitative easing is exacerbating numerous problems in the economy and it is leading to currency wars all over the world. It seems as though the an end may be in site for quantitative easing though. This year’s World Economic Forum was held in Davos, Switzerland. This forum is generally the wealthiest people in the world giving each other pats on the back. However this year they began discussing the fragility and damage being caused by quantitative easing.
The sessions at the World Economic Forum were marked this year by some unexpected but good to hear remarks. Former U.S. Secretary of the Treasury, Lawrence Summers, stated that “deflation and secular stagnation are the risks of our time”. Gary Cohn, COO of Goldman Sachs spoke about how it’s easy to stimulate your economy by weakening your currency. This is why the European Central Bank started printing 60 billion euros a week starting on March 1st.
As Dawn J Bennett has pointed out, quantitative easing in the United States has continued to help with the increasing economic disparity which is wiping out the middle class. This Keynesian intervention from the Federal Reserve is transferring wealth to the banks and wealthiest 1% in the country. Now as governments begin to back down on quantitative easing it is predicted by the Global Risk Report that we will see deflation as the bubbles on housing, credit and equity markets begin to shrink. One of the biggest surprises of these recent announcements and events is the fact that JPMorgan is coming out and declaring quantitative easing is negative because they have been one of the biggest beneficiaries of quantitative easing.
The question of what the European Central Bank will do is now very important. It seems unlikely that their plan for printing more euros will end well. Between the fact that the European Central Bank is planning to only buy a limited range of assets and that Greece is still struggling to dig themselves out displays both disunity and uncertainty in the Eurozone. Lastly if this plan is just in place to buy more time for the EU politicians then it’s likely this will also destabilize the Euro. We can only hope that governments around the world wake up to the danger and damage they are causing and take note of the recent actions by the Swiss and Denmark National Bank in the last two weeks. Those actions show how difficult it can be for neighboring countries to follow the European Central Bank’s policy.