Central banks bear a heavy burden as QE chickens come home to roost
Ill-thought-out emergency measures to bring the global financial system back from the brink led to asset inflation and now threaten social cohesion — but there is a way to fix that
Today, the weakened middle class, whose wages have declined for decades, is increasingly angry at society’s wealthiest members As with consumer inflation, the biggest winner is the state, which now owns through its monetary authority, a large part of its own debt, effectively paying interest to itself Quantitative easing, in which major central banks have bought government bonds outright and quadrupled their balance sheets since 2008 to $15-trillion, has boosted asset prices across the board. That was the aim: to counter a severe economic downturn and to save a financial system close to the brink. Little thought, however, was put into the longer-term consequences of these actions. From 2008 to 2015, the nominal value of the global stock of investable assets has increased by about 40%, to over $500-trillion from over $350-trillion. Yet the real assets behind these numbers changed little, reflecting, in effect, the asset-inflationary nature of quantitative easing. The effects of asset...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.