Quantitative Easing (QE#) the new 'Normal' for Central Banks?
Updated: Sep 16, 2019
Today, July 31st 2019, I was at a conference by S&P Global, Titled "Global Slowdown in 2019: A Healthy Necessity? " One of the speakers noted that Central Banks, outside of the US Fed, ECB, and BoJ, maybe looking at using QE should there be another downturn. Now, if QE is the way to go for CBs, this brings up significant political economy questions in this period of heightened populism. Irrespective of where one stands on the underlying reasons for #populism (#globalization, #technology, or poor government policy), more QE, which tends to (in general terms), reward more investors and capital suppliers, think higher equity prices, house prices, more risk taking by investors to search for yield - essentially the driver behind what we have seen in terms of asset price appreciation over the past 6-10 years to go on for a while longer.
Professor Raghuram Rajan, just today, posted a comment on this very topic today on Project Syndicate
Central Banks Are the Fall Guys
For decades, the freedom of monetary policymakers to make difficult decisions without having to worry about political blowback has proven indispensable to macroeconomic stability. But now, central bankers must ease monetary policies in response to populist mistakes for which they themselves will be blamed.
The current expansion underway in the United States of many other parts of the world, in my view, is unlikely to end this current wave of populism. And, if QE is the way forward for many CBs - due to global growth slowing (because of #tradewars, lack of investment, sluggishness in productivity, demographics etc), then the populist backlash against the current economic system, will likely only accelerate.
A related concerning issue, which I hope to write about later, is that CB have limited ammunition to fight another downturn, that's for another day.