QUANTITATIVE EASING
BRIAN KANTOR: Monetary policy is still in terra incognita
The big surprise is why this injection of liquidity has not led to more spending and much more inflation
The success of quantitative easing in promoting a global economic recovery calls for its reversal: the resumption of more normal monetary affairs. The scale of quantitative easing — the creation of cash by central banks since 2008 — has been extraordinary. Why this injection of liquidity has not led to more spending, much more inflation and far greater expansion of the banking systems and in-bank deposits than has occurred has been the big surprise. Providing an explanation for these highly muted reactions can explain why the reversal of quantitative easing may also be less eventful than might ordinarily be predicted. The total assets of the major central banks in the US, Europe and Japan have grown from just above $3-trillion in 2007 to more than $13-trillion now and are still rising. The Fed balance sheet grew from less than $1-trillion in 2008 to over $4-trillion by 2014.
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.