Saturday, January 24, 2015

Andrea Terzi — Is QE forever?

The point of Draghi’s QE is not the amount. It is the principle.

This is the really big news in the Eurozone where, until last week, the ECB’s monetary operations did not include the possibility of trading in the government securities market in the same way the Fed, the Bank of England, or the Bank of Japan do.
With QE, the ECB has become an actor in the government securities market and, as happens in the U.S,, the U.K., or Japan, this provides continuous liquidity to the bonds being traded, removing default risk.
The ECB is now acting like a central bank.
QE will not last forever. But the new attribute of the ECB as a dealer in government bonds is here to stay. 
Money and the Real Economy
Is QE forever?
Andrea Terzi, Professor of Economics, Franklin College, Switzerland

No comments: