by Summary:
The combination of loose monetary policy and tight fiscal policy is making the rich richer and the poor poorer. The sceptics were right. There is now strong evidence that QE works by boosting asset prices. Central bank purchases have a direct impact on bond yields and also encourage investors to rebalance their portfolios towards other assets, such as equities or corporate bonds. The resulting surge in demand for these assets has increased equity prices, depressed corporate bond yields and pushed up real estate values in some cities. In other words, QE has made the wealthy wealthier. Perhaps if states had tried, and failed, to boost output and inflation through expansionary fiscal policy (spending rises and tax cuts), it would have been legitimate for them to attempt a programme
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The combination of loose monetary policy and tight fiscal policy is making the rich richer and the poor poorer. The sceptics were right. There is now strong evidence that QE works by boosting asset prices. Central bank purchases have a direct impact on bond yields and also encourage investors to rebalance their portfolios towards other assets, such as equities or corporate bonds. The resulting surge in demand for these assets has increased equity prices, depressed corporate bond yields and pushed up real estate values in some cities. In other words, QE has made the wealthy wealthier. Perhaps if states had tried, and failed, to boost output and inflation through expansionary fiscal policy (spending rises and tax cuts), it would have been legitimate for them to attempt a programme
Topics:
Mike Norman considers the following as important:
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The combination of loose monetary policy and tight fiscal policy is making the rich richer and the poor poorer.
The sceptics were right. There is now strong evidence that QE works by boosting asset prices. Central bank purchases have a direct impact on bond yields and also encourage investors to rebalance their portfolios towards other assets, such as equities or corporate bonds. The resulting surge in demand for these assets has increased equity prices, depressed corporate bond yields and pushed up real estate values in some cities.
In other words, QE has made the wealthy wealthier. Perhaps if states had tried, and failed, to boost output and inflation through expansionary fiscal policy (spending rises and tax cuts), it would have been legitimate for them to attempt a programme of money creation that boosted asset prices as a last resort. But in the Eurozone, as in the UK, government spending has been squeezed even as central bankers have created trillions of dollars’ worth of new money.
The New Statesman