It appears that the massive, almost decade-long, transfer of wealth to the rich known as ‘quantitative easing’ is coming to an end. Of the world’s four major central banks – the US federal reserve, the Bank of England, the European Central Bank and the Bank of Japan – two have already ended their policy of buying up financial assets (the Fed and the BoE) and the ECB plans to stop doing so in December. Indeed, the Fed is expected to start selling off the $3.5trillion of assets it purchased during three rounds of QE within the next two months.
Given that, judged by its official aims, QE has been a total failure, this makes perfect sense. QE, by ‘injecting’ money into the economy, was supposed to get banks lending again, boosting investment and driving up economic growth. But overall bank lending in fact fell following the introduction of QE in the UK, whilst lending to small and medium sized enterprises (SMEs) – responsible for 60% of employment – plummeted. As Laith Khalaf, a senior analyst at Hargreaves Lansdown, has noted: “Central banks have flooded the global economy with cheap money since the financial crisis, yet global growth is still in the doldrums, particularly in Europe and Japan, which have both seen colossal stimulus packages thrown at the problem.” Even Forbes admits that QE has “largely failed in reviving economic growth”.
This is, or should be, unsurprising. QE was always bound to fail in terms of its stated aims, because the…