What's for sure is that
whereby the "Big Four" central banks have for four years
effectively created new money by expanding their balance sheets and buying
mostly government bonds from their banks, is back on the agenda for all
their upcoming policy meetings.
Government credit cards
are all but maxed out and commercial banks' persistent instability,
existential fears and reluctance to lend means the explosion of newly
minted cash has yet to spark the broad money supply growth needed to
generate more goods and services.
In other words, electronic money creation to date
- whether directly through bond
buying in the United States or Britain or in a
more oblique form of cheap long-term lending by the ECB - is not even
replacing what commercial banks are removing by shoring up their own
balance sheets and winding down loan books.
Global investors appear
convinced more QE is in the pipe.
"It is almost as if
investors are saying QE will happen no matter what," said Bank of
America Merrill Lynch's Gary Baker.
BoA Merrill's latest
monthly survey of 260 fund managers showed nearly three in four expect the
ECB to proceed with another liquidity operation by October.
Almost half expected the
Fed to return to the pumps over the same period.
The BoJ has already
upped asset purchases yet again this year and Bank of England policy dove
Adam Posen said on Monday the BoE should not only buy more government
bonds but target small business loans too.
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