The Brief
Get Up To SpeedCentral banks all around the world have been printing money. This policy, known as quantitative easing in banker jargon, has driven up the price of stocks and bonds. But will it lead to real and sustainable increases in global growth, or is it sowing the seeds of future inflation?
View Debate PageRoger Bootle
- Executive Chairman, Capital Economics
This week the Monetary Policy Committee (MPC) will decide whether or not to extend its programme of quantitative easing (QE), ie buying assets with central bank money.
It's one of the oldest tricks in the book - rulers have always sought to reduce the coinages precious metal value.
Only when umpteen million of Europes unemployed and dispossessed find jobs and hope will the issue be over.
Simon Johnson
- Fmr. Chief Economist, International Monetary Fund
Can tax cuts pay for themselves, inducing so much additional economic growth that government revenue actually increases, rather than decreases? The evidence clearly says no.
In our view, the Feds current print the money strategy (and, yes, I know the Fed doesnt like this term or even quantitative easing) is make-or-break for turning the economic corner any time soon. Its incredibly risky in terms of potential inflation more than the Fed would ever concede but preferable to all the available alternatives.
Johnson and Calomiris debate whether to break up big banksprobably the biggest open question remaining since the financial crisis.
At a stroke, the proposed law would force global megabanks such as JPMorgan Chase and Bank of America to become smaller and much simpler -- divorcing high risk activities from plain-vanilla traditional banking.
The dangers of reckless behavior by global megabanks are now understood much more broadly. And Brown-Vitter provides an appropriate road map for addressing some of the core problems and making the financial system significantly safer.
Johnson discusses financial reform, Too Big to Fail, and Americas huge national debt.
The true conservative agenda should be to take government out of banking by making all financial institutions small enough and simple enough to fail.
Too-big-to-fail banks should be made smaller, and preferably small enough to fail without causing global panic.
With unemployment obstinately high and fiscal policy on ice, the Federal Reserve will continue to push down long-term interest rates. Further rounds of quantitative easing will tend to weaken the dollar. This is a much more effective way to move our currency than any foreign-exchange market intervention.
Clearly, the Fed chairman recognizes the severity of the problem and has decided to do whatever it takes to prevent anything like the Great Depression from happening again. Given where we are today, that means printing money, even if that runs the risk of creating a serious inflation problem.
Edward Conard
- Visiting Scholar, AEI & Former Partner, Bain Capital
Jared Bernstein argues, “The new rules must prioritize the economic needs of low- and middle-income families while preserving the democratic, accountable policymaking processes that are essential to creating and maintaining the environmental, consumer, labor, and human-rights policies on which we all rely.”
The Fed has printed more than $2 trillion of money since the financial crisis -- a fourfold increase -- with little, if any, effect on growth or inflation.
If QE was working if it created more value than it cost why would the Fed reset policy expectations prematurely while unemployment is still at 7.5%, and even higher if you include the underemployed?
Edward Conard, former partner at Bain Capital, talks with Betty Liu about the impact of pending immigration legislation on the Republican party and explains why he believes the Fed has failed with quantitative easing. (Quantitative easing conversation begins at 3:01.)
For the U.S. economy to reach its full potential, Washington should return to the policies that drove economic growth over the past two decades: lower federal spending and less onerous government regulation.
Its clear from the evidence: what overwhelmingly makes a person poor, whether African American or white, is an inability or failure to complete school and being raised by an unmarried parent.
Raising the minimum wage reduces lower-skilled employment.
When you look at the amount of profit being made by investors, its very small in comparison with the value to consumers.
The left has blamed the success of the 1% on the slow growth of middle incomes. If income inequality were truly bad for the middle class, we would not have seen the outsized growth in employment in the U.S. relative to Europe and Japan.
Chetty and Saezs new study, Is the United States Still a Land of Opportunity? Recent Trends in the Intergenerational Mobility, debunks the notion that income mobility in the U.S. has declined.
Edward Conards blog.
Andrew Huszar
- Sr. Fellow, Rutgers Business School
We went on a bond-buying spree that was supposed to help Main Street. Instead, it was a feast for Wall Street.
TIME spoke with Huszar about role in quantitative easing and why he publically called for the policys reversal.
More than any other American, Tim Geithner personifies the era when we lost our nerve when it came to reining in the size and concentration of Wall Streets banks.
In this video, Huszar discusses quantitative easing with CNBCs Fast Money team.
FOR
Gagnon outlines some basics about monetary policy, discusses whether the first rounds of QE worked, and address criticisms of the program and whether a third round of QE will help.
Fed policymakers and other North Atlantic central bankers who believe that further extension of QE poses substantial risks need to explain exactly what those risks are and why we need to guard against them now.
The euro zone is that counterfactual. No thanks.
It does appear that QE has, in the end, been at least a modest success particularly in the United States and the United Kingdom, two countries that were early adopters of QE and today are doing better than most.
AGAINST
The costs of accumulating another $1.7 trillion of Treasuries and MBS will be shown to exceed the benefits.
Testimony on the risks of quantitative easing as conceived in 2009.
The equity-market downturn is the inevitable result of the central banks policies. The unwinding will likely continue for months
QE is partly to blame for record share buybacks and meager capital spending.
The Federal Reserve continues to cling to a destabilizing and ineffective strategy.
Bond buying distorts capital flows and distracts governments from the urgency of structural reforms.
Why has so much attention been given to these monetary policies with no clear explanation of how they might be expected to work and little evidence of effectiveness?
Background
Introductory videos on quantitative easing.
Hirsch explains what this nuclear option it is, and what the Fed hopes it ll do.
To carry out QE central banks create money by buying securities, such as government bonds, from banks, with electronic cash that did not exist before. The new money swells the size of bank reserves in the economy by the quantity of assets purchasedhence "quantitative" easing.
QE Comparison
The European Central Bank is poised to launch a 11tn round of QE on Thursday, years after other world central banks embarked on monetary stimulus
Federal Reserve
The U.S. Federal Reserves once-in-a-lifetime program to buy immense piles of bonds, month after month, in an extraordinary effort to restart a recession-deadened economy came to an end in October 2014 after adding more than $3.5 trillion to the Feds balance sheet an amount roughly equal to the size of the German economy.
European Central Bank
Why the ECB is finally buying bonds.
The success of QE in the United States reflected initial conditions that were very different from what we now see in Europe
Will policy makers purchases of government debt prove enough to revive the regions economy?
Bank of England
The Bank announced that its Monetary Policy Committee (MPC) decided the size of the QE programme would stay at £375bn (521.9bn, $576.6bn) and the interest rate would stay at 0.5%.
Introductory videos on quantitative easing.
The "people's QE."
Bank of Japan
The Bank of Japan has been slurping up huge quantities of Japanese government bonds through quantitative easing. Is the central bank making a profit from these JGB purchases, or is it losing money?
The launch of aggressive monetary easing by the Bank of Japan stunned financial markets two years ago. But is it still sustainable?
On October 31st the Bank of Japan (BoJ) stunned the financial markets by unexpectedly expanding its programme of quantitative easing.
