More euro-tragedy
Despite the uncertainties ahead of the Greek general election, the European Central Bank (ECB) went ahead and announced quantitative easing (QE) of €60bn per month from March to at least September 2016.
What makes this interesting is the mounting evidence that QE does not bring about economic recovery. Even Jaime Caruana, General Manager of the Bank for International Settlements and who is the central bankers’ central banker, has publicly expressed deep reservations about QE. However, the ECB ploughs on regardless.
The Keynesians at the ECB are unclear in their thinking. They are unable to answer Caruana’s points, dismissing non-Keynesian economic theory as “religion”, and they sweep aside the empirical evidence of Keynesian policy failures. Instead they are panicking at the spectre of too little price inflation, the continuing fall in Eurozone bank lending and now falling commodity prices. To them, it is a situation that can only be resolved by monetary stimulation of aggregate demand applied through increased government deficit spending.
This is behind the supposed solution of the ECB’s QE, most of which will involve national central banks in the euro-system propping up their own national governments’ finances.
The increased socialisation of the weaker Eurozone economies, especially those of France, Greece, Italy, Spain and Portugal, will inevitably lead to unnecessary economic destruction. QE always transfers wealth from savers to financial speculators and other early receivers of the new money. Somehow, the impoverishment of the working and saving masses for the benefit of the central bankers’ chosen few is meant to be good for the economy.
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