Halligan: The Policy of Quantitative Easing Is “Madness”

“No matter that ‘deflation’ is an almost entirely bogus argument. Strip out an oil-driven 6.3% drop in energy prices, and inflation was positive in December. Yes, we’re below the ECB’s 2% target, but that’s because the economy has stalled, with survey data pointing to fourth quarter growth of barely 0.1%. But that’s not down to a lack of printed money. Firing up the ECB’s virtual presses will do nothing to address the genuine obstacles to Eurozone growth—the silted-up labor markets, the ghastly demography, the still massively debt-soaked banking sector that is too fragile to lend, so starving creditworthy firms and households of finance, in turn strangling aspiration and commerce…But to think that QE will fix the Eurozone, and solve ‘deflation’ is just nonsense. Once begun, fully-blown Eurozone QE will go on for years. By cossetting busted banks and draining resources, a euro-QE drip-feed will send Europe into a decade or more of near-zero growth.”

“If Germany then punishes Athens, the Greeks could walk, putting us in extremely dangerous Eurozone break-up territory. Even if Syriza agrees to negotiate, other bailed-out countries will then demand less onerous terms, which could send bond markets hay-wire…History shows, time and again, that this policy is madness and, ultimately, deeply counter-productive. But since when did we learn from history?”