- Don’t expect a QE miracle as effects would be muted
- Sovereign QE would lead to risk redistribution
- Current developments don’t warrant policy response
- Balance sheet target it not a sensible policy strategy
- There is no “trench warfare” in ECB council
- Inflation is low due to positive supply shock
- Sub-zero inflation doesn’t immediately mean deflation
- Inflation could fall below zero in coming months
- Markets must learn not all expectations can be met
- Private debt QE less legally problematic than government QE
Perhaps the most important comment is this one;
‘‘In the framework of a broad QE program, government bond purchases make the lives of finance ministers easier, so that the pressure to consolidate and the eagerness to reform could be reduced. A broad QE program can, bypassing parliaments and governments, lead to a redistribution of risks between taxpayers in the member countries, unless the purchases are limited to the countries with the highest credit rating or each central bank purchases bonds at the risk of its own country. There are indeed a whole row of economic reasons that speak for the rejection of government bond purchases — before you even consider the legal question of whether they’re compatible with the ban on monetary financing, even if
secondary-market purchases aren’t expressly forbidden.’’
He’s 100% spot on that the other proponents of sovereign QE are wanting it so that they don’t have to get off their arses and fix things themselves. It’s typical Europe where problems should be solved by someone else. Against that backdrop I hope that QE doesn’t come and that it forces leaders to wake up and smell the roses. Mind you, that’s something we’ve been waiting for for the last 8 years now
