Quantitative Easing – The End of the Big Easy – Did it Work?

Quantitative Easing – The End of the Big Easy – Did it Work?

Welcome to illuminati silver, we tell you
the truth about silver. Today is Tuesday 2nd October 2018 and we are
briefly commenting on an article written in Financial World this month entitled – ‘Quantitative
Easing – The End of the Big Easy’ by Paul Wallace.
Paul Wallace is the former European Economics Editor of the Economist Magazine and the author
of “The Euro Experiment” published by Cambridge University Press (details listed
in the description below this video) Financial World is the monthly publication
which members like us of the London Institute of Banking & Finance receive which discusses
topics specifically relating to Banking and Finance. It’s a serious publication really
for Bankers and Banking Students but it addresses a range of subjects not normally found easily
on the internet and certainly almost never covered by the ‘pumping sites’ which are
only interested in lambasting bankers and demanding that you buy as much gold and silver
as you possibly can today. But banking has many aspects and whilst Investment
bankers and speculators undoubtedly have contributed their fair share to our economic woes, there
are also aspects of banking which have to some extent enabled the West to have levels
of prosperity not seen or experienced in other parts of the World.
Anyway the purpose of todays video is to analyse Paul’s article in which he discusses the
phasing out of QE in major economies and asks how effective has the policy actually been.
We shall quote a small part of the article. It runs as follows:
“An extraordinary experiment is drawing to a close. Led by the US Federal Reserve,
central banks embarked upon quantitative easing (QE) – buying financial assets with newly
created money – in response to the 2008 banking crisis. By the end of 2017, the Fed,
ECB, Bank of Japan and Bank of England (BoE) had together made $11tn of purchases. Now
the Fed is leading the way in phasing out QE. The ECB, the last big central bank to
adopt the policy, will stop its purchases at the end of this year. What has the experiment
proved? One thing it has certainly shown is that central
banks can do more than move short-term interest rates, their main policy tool. They resorted
to QE precisely because they had already brought short-term rates down as far as possible in
their efforts to foster a recovery after the deep crisis-induced recession and to combat
deflationary pressures. That limit is set by the “zero bound”, arising from the
fact that depositors charged negative rates can switch into cash, which at least does
not lose money. Although both the ECB and the Bank of Japan pushed rates below zero,
their foray into negative territory was limited. QE broke new ground by enabling central banks
to bring down long-term interest rates, such as yields on bonds with maturities of 10 years
or more. Previously, they had been able to affect long-term rates only indirectly as
markets incorporated changes in current and expected short-term rates into bond yields.
Indeed, when long-term rates failed to respond to the steady tightening in US monetary policy
in the mid-2000s, the Fed’s long-serving chairman, Alan Greenspan, called it “a conundrum”.
He further pointed out that as rates fell, investors would move into riskier assets such
as corporate bonds and equity markets and that influx of capital would spur growth and
boost the economy. Whilst the impact of QE was difficult to assess
as different measures provided differing results with no absolutely clear pattern.
We quote a little further from the article: “In general, the policy tends to depreciate
currencies but there are other effects, too. Research by the BoE in 2016 suggested, for
example, that the Fed’s QE had a powerful impact on equity prices in the UK. Whether
or not the BoE or the Fed was responsible, the rebound in UK financial markets during
the first phase of the BoE’s QE was remarkable. Equity prices rose by 50 per cent between
March 2009 and May 2010 while the spreads between corporate bonds and government bonds
narrowed sharply over the same period. The rally might not have been wholly because of
QE but it is hard to imagine that it would have happened without it.
Even so, the wider effect of QE on the economy has been more modest than many originally
expected. The BoE’s purchases of gilts eventually reached £435bn. But fears that the policy
would ignite inflation proved to be well off the mark. Inflation has recently been above
the 2 per cent target in the UK but that mainly reflects the big devaluation in sterling following
the vote to leave the EU. Inflation was around zero in 2015 and a mere 0.5 per cent in June
2016 when the referendum was held. In the eurozone, the ECB has more than doubled
the scale of its asset-purchase programme, from €1.1tn to €2.6tn. The buying, originally
due to run from March 2015 to September 2016, has been extended in stages to the end of
2018. Yet inflationary pressures remain subdued. The headline rate has recently gone above
the bank’s target of “below but close to 2 per cent” but that is mainly because
of higher energy prices. Core inflation, which strips out volatile components such as food
and energy, is only around 1 per cent, little higher than at the end of 2014, when it stood
at 0.7 per cent.” He further points out that no Country in the
World has adopted QE more aggressively or for a longer period of time than Japan which
began theirs back in 2001 and is still continuing with it with its 10 year bond rate still standing
at zero percent. Now this next part of his article is very
important: “Despite these apparently modest effects,
it can be argued that QE, together with rock-bottom interest rates, averted a disaster. The BoE
estimated that the initial £200bn of QE pushed up GDP by between 1.5 and 2 per cent and inflation
by 0.75-1.5 per cent. The ECB calculates that its measures – mainly QE – between mid-2014
and October 2017 will have pushed up GDP and inflation by 1.9 percentage points cumulatively
between 2016 and 2020. No central bank is keen to highlight one of the most important
effects of QE – its impact on the public finances. Governments have benefited from
lower interest rates on new borrowing since the purchases began. Although national treasuries
continue to pay interest on the bonds bought through QE, they also gain from the bumper
profits they get from their central banks, which are financing the purchases at negligible
interest rates. Although many Germans rail at the ECB’s policy, its effect in lowering
borrowing costs has contributed to Germany’s budget surplus and falling public debt.”
He then continues with this conclusion: “QE has shaped financial markets in the
past decade and will continue to do so for years to come. The purchases may be ending
(although not yet in Japan), but central banks will retain bloated balance sheets for a long
time. The ECB is set to follow the BoE in preventing any automatic rundown in the assets
it holds by continuing to repurchase the amount that matures. The Fed is the only big central
bank that is actually shrinking its pile of assets. It is doing so not through direct
sales but by gradually reducing the amount of maturing debt it repurchases.
For the time being, the experiment appears to have worked. But it is too soon to reach
a definitive judgment. The worry about QE is that, together with ultra-low interest
rates, it has fostered a renewal of the risky behaviour that led to the financial crisis
in the first place. There are also arguments that it has increased inequality by massively
boosting the wealth of asset holders. If the happy days end in tears again, the final verdict
on QE may be that it worked too well for its own good.”
Now perhaps from this article by a serious financial commentator and author to the senior
people within the Industry the general consensus is that the US is certainly for the near future
determined to reign back its QE thereby further strengthening the US dollar compared with
other world currencies as its foreign counterparts are still to some extent dependent on such
policies. This is one of the main reasons why we are not convinced yet that the US dollar
has had its day and that whether one feels QE should have been introduced or not, the
reality is that its there and shall continue to be there for some time to come. With President
Trump, assuming he remains in power long enough, following an US 1st policy, and the FED determined
upon higher interest rates into 2019 – we are confident at least for this decade the
US dollar will remain supreme, and what we have to attempt to calculate taking this as
well as a myriad of other factors into account, is the effect on gold and silver prices. If
left to this one factor alone it would press heavily down upon them despite the fact that
they are already at relatively low levels and especially compared with 2011. We hope you have found this video interesting
and informative and if so, please give it a thumbs up and share it on twitter. Please
ensure that you have subscribed to our channel and pressed the bell sign so that you are
notified of any future videos. Also kindly visit our website at illuminatisilver.com
and if you haven’t already done so please subscribe as a free member for regular email
updates and offers. Disclaimer:
Illuminati Silver owners come from a background of Banking, International Wealth Management
and Economics. Having now retired from these worlds we are not qualified to give investment
advice. Therefore, this and other productions must not be deemed to be giving such advice
and merely represent the personal views of its owners.


  1. ending QE should provoke deflation in some areas, as fewer dollars are available to chase assets. this is a natural outcome and will strengthen the USD. that is certainly good news for G/S buyers who are looking at wealth preservation for decades to come. as Harry Dent says, we are entering Zero Hour and will see the Sale of a Lifetime before 2021

  2. Your Government is good and kind or so they would have you believe, yet they legalized fiat , which confiscates your wealth by inflation and at the same time legalized the manipulation of the spot price of Gold , so that you believe you can't protect your wealth from confiscation. How kind are they when your Govt. legalized the Flexner Report ,1909 which obsoleted the cures and cost the lives of millions. The time when people will have lost everything to their crime is coming , then everyone will think alike and make changes.

  3. I don't typically hear much analysis of how the central banks are going to liquidate there balance sheets. In layman's terms, if a family runs up a huge amount of debt pulling demand forward, they don't feel the affect until they start paying the bill. Central banks have all of the QE debt sequestered negating the – inflationary ? – effects.

  4. So, the Central Banks created money from thin air, used QE to buy assets to stimulate economies, and get to keep trillions in profit without taxes.

  5. Thought provoking ending…

    Trump has made predicting the future somewhat difficult, as he from my understanding is doing all the things that might just save the USA.. ( or this this could just be like the Roman Empire collapsing from the outside in)

    That being said having gold and silver as part of your insurance policy is just like having insurance on a car you hope to never use it….

    honestly above my paygrade to understand how it will play out.. I got into this silver out of rumours of 600 dollars an ounce price speculation and will continue to add to my position because right now buying a house in Australia is overpriced and from all of the data silver is under priced…
    Thanks as always for the video's always interesting and informative..

  6. QE saved symbio-parasitic systems that should have failed on the basis they were a threat to the economy they shouldn't have been.

    Is there a role for finance in prosperity? Yes. But a tiiiiiiiiiiiiiny*, boring, *tiiiiiiiiiiiiiiny (did I say tiny?) version of what it is now – a massive, cancerous real-economy siphoning tumor.

    The truth is banks have taken up the rent-seeking position of ye olde lords of yore – siphoning tithes of half if not more of people's incomes non-productively.

    Has the experiment worked? Only if you assume financial systems are seperate from social or political ones – if you don't, you haven't seen a situation like this coming since the 1700s. We all know how that works out for the people insulated to it in the end…

  7. Everything aside, why don't you join national geographic channel as a narrator in their documentaries for the voice you have.

  8. Canaanites and Esau Run these banks and taking advice from a banker is letting the wolf in the Hen house and believing after the corn chowder he wont get him a chicken dinner, I know who you serve why dont you be honest and tell these people bet you dont coward, you father got a short time to rule his days are numbered, The economy will colapse at the end of Trumps term so they can bring in the whore of Babylon, she will be the last president and will give us up to the beast running the UN, It is written in the book of Truth, You are of your father the devil and his will you will do! Repent or face Hells Fire! Illuminate the light of lucifer, the goat god, lets see how long you leave this up

  9. Did QE work? Well it, along with irresponsible interest rates, was a sticking plaster but it has exacerbated the debt problem and at some stage it will come to a head. Governments will eventually have to refinance at higher rates. The cost of servicing US debt is already 7% of GDP, in the UK it's 6%. The crazy thing is that stocks don't actually look that expensive. US PE ratios are at an average of about 26 which is high (although forward PE is just 19) but take the US out of the equation and the rest of the global stock market has average PEs of a bit over 15…..the lower end of fairly priced. It's bond prices that are the concern. Maybe if average Joe could afford to put enough money away for tomorrow then equities would be higher but he can't (only 15% of UK citizens have a Stocks and shares ISA). It doesn't matter that QE hasn't caused the CPI to go sky high. What does matter is that the money supply has increased, and regardless of the (very poor) measures of inflation today, this will have consequences tomorrow. And those that will suffer are the risk averse who hold gov bonds and cash. It's hard to accept that those that aren't in the game are punished for the excesses of those who do play it (and I speak as a committed capitalist with at least some assets, I'm no corbynista!!)

  10. I suspect that inflation is far higher than the advertised monthly figures. I have my own list of 20 items, which I’ve kept updated. I’ve even noticed a pronounced shrink in ingredients and even sizes of printed materials. The figure is closer to 12% year on year in the U.K.

  11. Two things here. First I did not receive a conformation email to join your website. A couple of things that occur to me in listening to this information are we can clearly see that the divide between the rich and the poor is greater than I have ever seen it and how do we know that it would have been worse if they had not implemented "quantitative easing" ? It seems to me that it only magnified the risky behavior that prompted the policy in the first place. Also, how does one think that they can apply the same principles worldwide when there are so many different types of governments and systems? Anyone care to comment?

  12. Also the bankers/speculators are the ones that took advantage and caused all the problems in the first place, why then should the receive the rewards if any that quantitative easing produced? Y'all may see it differently having the background that you have but how is this right by any standard?

Leave a Reply

Your email address will not be published.