Quantitative easing is nothing new. It’s been attempted many times and, in some cases, consistently over the past decade or more. And, to this point, it’s been nothing but an abysmal failure in every case. As Rita Mae Brown noted, “Insanity is repeating the same mistakes and expecting different results” (Sudden Death).
Of course, many attribute that quote to Einstein. And perhaps this illustrates out point further. Just how much disinformation is distributed with facts being ignored by those most affected? In this particular case, from an economic perspective, central bankers have proven their insanity.
Many have accused Japan of embracing a policy of QE in the early 1990s. However, while they attempted many angles in order to stimulate their economy, QE wasn’t officially implemented until the early 2000s. This was in spite of the BOJ, at least up until 2001, stating clearly that QE “is not effective.”
Keeping interest rates at nearly zero, the BOJ began to confront the economic problem with QE just a short-time later through bond purchases (sound familiar?). By flooding the banks with cash they avoided liquidity issues and made debt more readily available. We’ve seen how well it’s worked for them.
Now the UK, ECB and FED are all embracing the same insanity. Of course, it’s only insanity if, indeed, they expect a different result. However, as we noted previously, it seems apparent that central banks are not out for the good of the economy, but ultimately for the growth of their own assets. QE helps move such a goal along quite splendidly because it taxes the people for the cash, through inflation and then by confiscating materials they purchased with debt they couldn’t afford to service. This is all done with currency that is created by fiat. Not a bag gig if you’re a central bank.
The ECB has referred to their efforts as long term refinancing operations (LTRO), though a rose by any other name… The effort makes it easier for businesses to raise capital, which in turn is hoped to protect jobs and filter down to more liquidity in the private sector. Of course, all of this is promoted through debt, as though this ill-begotten Keynesian perspective of stimulation is the end all. In fact, all it really serves to do is shackle the populace in greater debt.
Over the next few days we’ll examine the QE steps implemented by the FED. They are as follows: QE1 – Dec 2008, March 2009-March 2010, QE2 – Nov 2010-June 2011, Twist – 2011, and QE3/∞ – Sept 2012.
For your prosperity,
J. Keith Johnson
The Gold Informant