The FT reports this morning that:
The European Central Bank has passed the €1tn mark for its controversial purchases of government bonds, putting pressure on policymakers to address the scarcity of available assets when they meet in Frankfurt this week.
Three thoughts. First, there is no inflation, and that was the desire.
Second, there is no real growth, and that was the hope.
Third, as noted, there aren't many bonds left to buy, so the policy is running out o road.
There is, of course, a solution. We need a Europe wide Green New Deal. This would create the new bonds to purchase and the proceeds would be invested by releasing a carbon army of people across the whole of Europe to green its economies and transform the prospects of generations to come.
Why, oh why, won't the QE game playing stop and Green Infrastructure Quantitative Easing begin.
Then we might get some inflation.
Then w will have the right sort of growth.
And then there will be binds to buy.
It's the complete package waiting to be used.
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It would be interesting to see figures for “quantity of bonds available to buy” both now and 5 years ago. I think they would not support your assertion.
Which is irrelevant: QE has happened and the goals are still relevant so assuming a static analysis is appropriate makes no sense at all
Are you saying then that your 3rd point was irrelevant? That it matters not a jot if there are many or few bonds left to buy.
I would not have said it if it was not relevant
So are you saying that there is a shortage of EZ bonds to buy compared to the availability 5 years ago?
It is widely known that there is a shortage of bonds meeting ECB QE criteria
I think what the other Mikes are missing is there’s a set of criteria for ECB Quantitative Easing which is complex but key rules are the bond rate must exceed the ECB deposit rate, and purchases are in proportion to the size of the economies of the member countries ( not size of debts ). These are good criteria, and they’d be foolish to relax them, but that doesn’t rule out foolishness. Thanks for the explanation Richard.
I think there’s some sad posters on here, rushing to type their views without a little basic research. You show a lot of balls in the way you deal with them Richard.
Bill Mitchell has just written an interesting article which essentially takes up the issue of overt monetary financing after the bonds (gilts) are in short supply for purchase:-
http://bilbo.economicoutlook.net/blog/?p=34315
“there is no inflation”
Not yet, anyway; but monetary policy usually has an 18 month time lag, so perhaps later.
Hang on: we’ve had QE since 2009
Indeed. But the future doesn’t always resemble the past.
Is it possible that the Cantillon Effect is causing the new money to pour into equities and cause price inflation there?
Has anyone looked to see if there is a correlation between the new money and the stock markets since 2009?
That might explain why the velocity of money has fallen.
The linkage looks clear
I think causality is hard to prove but I have little doubt the relationship exists