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Neil Crammond

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Neil Crammond - trader

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WHY QUANTATIVE EASING IS A WEAPON OF MASS DESTRUCTION !

24 August 2015  |  3590 views  |  2

WHY QUANTATIVE EASING IS A WEAPON OF MASS DESTRUCTION  !

 

History tells us that planning an escape from Q.E. is virtually impossible, our last effort kept rates on hold for over 23 years and concluded with the start of WW2 .

This “normalisation” of our economy is proving very painful to accept; it appears we have enjoyed the benefits of stock market; house; commodities and other high end asset market rallies but struggle to re adjust to reality. In fact Central banks have continually encouraged us through low interest rates and cash injections to invest in our markets as they’re apply medicine when necessary. The issue now is that we have become dependent /addicted to its medicine and cannot function without it !  China new stock market is a perfect example of this “blind faith”  …….. Chinese investors bought stocks with gay abandon, adding more at rock bottom; soon finding there was a basement below …..They still kept buying  as instructed by PBOC comments and false figures ; only to find a cellar beneath   ……….The Chinese bank still promised riches and still folk bought shares only to find under the cellar was HELL ………Remember what they say about Hell ……….There are 18 levels of HELL !  This continual drip of QE medicine has began to hurt our retail investors who expects /demand government assistance again & again. Since 2009 Central banks have continued to drip feed new rescue measures and “restore” confidence in our markets; 8 times we have recovered from a 10% fall to bounce back to new highs as QE bazooka fixes our markets .

However it appears that our Central banks are both clueless and uneducated in returning us to “normalisation “  This weapon of mass destruction   have given “blind faith” to many retail investor who simply reloads his gun  placing his pension ; livelihood into our governments QE system ; allowing their stocks ,houses commodities and other assets to grow ; in fact they have probably borrowed mortgaged their assets to buy more stocks !  Sadly fuelled by central banks insistence that sell offs were instigated by malicious short sellers  ; Hound of Hounslow etc .

The quandary we have is

  1. Can /should the central banks reinject with another dose of QE medicine?
  2. Are “zero” rates the new normalisation?
  3. Q.E lasted 23 years previously and perhaps we are attempting to early for an exit?
  4. Have our Central banks finally run out of puff & bullets ; do they need a new super gun or indeed a new subject as probably happened in 1939 

 

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Comments: (2)

Robin Nandi
Robin Nandi - Atom Bank - Durham 25 August, 2015, 13:00

QE worked well in US, UK, Europe and Japan post crisis. Stock markets recovered, economies returned to growth. Europe still has a massive debt problem, but that is related to the Euro rather than QE.

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Paul Zaman
Paul Zaman - DomaCom - Singapore 28 August, 2015, 05:50

The traditional economic solution was to aim for increasing productivity. Today we have vast goggles (a vast measurement) of technology untapped. We have the opportunity for technology led productivity to create new economic growth and rescue the western, the developed and the devloping economies.

 

Sadly the focus on QE, on what it is properly called lending money and usery, has since the beginning of civilisation been seen as a merit bad in all societies. Lending for utilities and production  eg co-operative/farming/union banks/ development banks and lendinh increases and lubricates economies. Lending for luxuries, like Federal, State and local government administration, luxury residnetial housing, margin lending investment do not create any real wealth.

Lets focus more on technology led productivity and less on QE/margin lending on non-productive goods and services.

 

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