The US authorities originally billed QE as a $600bn exercise.
By unlocking frozen interbank markets, it was supposed to spur growth, breaking the credit crunch. As meaningful recovery remained elusive, though, QE2 was launched in 2010, with its successor two years later.
In sum, the world’s most important central bank has fired $3,700bn from its monetary bazooka. America’s QE has been six times bigger than envisaged. The Fed’s balance sheet has grown more than three-fold in just over half a decade – an unprecedented monetary expansion. And it’s not just America, of course.
Launched in March 2009, British QE was presented as a £50bn program. It has since ballooned to £375bn, some 7.5 times the official prediction. The Bank of England’s balance sheet has quadrupled, with our QE focusing on gilt purchases. The Bank now holds over a third of all outstanding sovereign bonds.
...As UK state spending has surged over recent years, with our national debt doubling to £1,400bn since 2008, we’ve kept our public finances afloat only by effectively selling government debt back to the state, using newly-created money. If that sounds like dubious circular financing, that’s what it is.
The global political class retained power
with the help of Central Banks and the financial industry.
...The ECB’s balance sheet has more than doubled since 2009. And now the Fed has “ended” QE...
...rather than using the room for manoeuvre provided by early QE to address the underlying issues, closing down ruined banks, merging them with stronger competitors while wiping out shareholders and protecting depositors, massive monetary expansion was used to mask problems instead.
Problems that still exist
under an artificially created economic stability.
Far from forcing weak banks to come clean and fully disclose the true state of their rancid balance sheets, which would have been the proper way to run a capitalist economy, QE was extended again and again, drip-feeding zombiefied financial institutions, keeping them on life support.
This was a major mistake.
Far from rebooting wholesale money markets, QE spiralled out of control, continually diverting resources towards continued “mal-investment” as large Western financial institutions were hosed down with central bank liquidity.
“mal-investment” = distorted financial markets
As such, an emergency measure became a very counterproductive comfort blanket. By rigging sovereign bond markets, QE has helped Western governments avoid tough fiscal decisions. By shielding banks from the reality of their bad investments, it’s also exacerbated too-big-to-fail and made another crash more likely...
...While some of the central bank funny money has sat on the balance sheets of busted banks pretending to be solvent, much of the rest has found its way into asset markets – equities, famously, but also tangible assets.
Since 2009, QE has undoubtedly pushed up oil prices, further stymying Western recovery. Combined with poor harvests, it also bid up soft commodity prices, helping to explain the mid-2010 food price spike, which in turn seriously aggravated the Arab Spring.
...QE has boosted equity prices, while hammering ordinary savers (not least pensioners recently forced to annuitise). The flip-side of savers’ low interest-rate pain, of course, has been a massive wealth transfer to bailed-out banks. QE has been an umbilical cord of free money to the financial behemoths that did much to trash our economy...
...it’s far too early to truly judge the impact of what amounts to a huge monetary experiment – not least as the much-discussed “unwind”, the reaction of pumped-up equity and bond markets when vast Western money-printing finally stops, could yet be explosive.
...future historians will wince when they examine QE. This policy, to the massive extent we’ve used it, has been unwise and unjust, harming Western electorates and souring relations with the increasingly powerful non-Western nations upon which our future prosperity depends."
The Bank of Japan jumps the monetary shark and escalates currency war
The source of America's record wealth inequality = Central Bank Money Printing
"BOJ Stands Ready to Buy Every New Bond Abe’s Government Issues" = Ponzi Scheme
Fake, artificially high financial markets, top right of the chart; Fed Speak = Orwellianland
"How much do central banks need to inject to keep the stock market from crashing?