mercredi 14 janvier 2015
The winners from Draghi’s QE? America and Britain
Posted on 05:23 by nice news
Waiting for Godot seems like just a few minutes by comparison. The markets have been expecting the European Central Bank to launch its own version of quantitative easing since the dinosaurs roamed the earth — or at least since 2011, when it became clear the eurozone was going to need something to lift its struggling economies off the rocks.
But now it appears it is about to finally happen. At its meeting next week, the ECB is widely expected to lay out its plans to follow the U.S., U.K. and Japanese in printing money. If it doesn’t, there will be chaos. QE is already built into bond market. If it doesn’t happen, there will be a huge selloff.
But who will be the real winner when the printing presses in Frankfurt, metaphorically at least, finally start to roll? The plan is for it to help the struggling economies of Europe’s periphery.
The reality is that the two markets that will benefit most are the U.K. and the U.S. Why? Because when central banks print money, it inevitably sloshes outside of its own borders, and Britain and America are far more attractive homes for that cash right now than Greece or Italy. Indeed, even if the ECB pulls back from QE the U.K. and U.S. will still come out ahead — because both are safe havens when Europe is in trouble.
Nobody knows for certain whether the ECB President Mario Draghi will finally persuade his colleagues to launch QE when they meet on Jan. 22. True, the case for the central bank to print money is compelling. The eurozone is already in deflation. Prices dropped by 0.2% in December, the lowest reading for five years (and remember, that was in the middle of a global slump). In countries such as Spain and Greece prices are falling far more rapidly than that.
Growth has weakened, and is still declining. The German engine has stopped running, and its mighty export machine is stalling. France is sliding ever deeper into a depression. Growth across the
But now it appears it is about to finally happen. At its meeting next week, the ECB is widely expected to lay out its plans to follow the U.S., U.K. and Japanese in printing money. If it doesn’t, there will be chaos. QE is already built into bond market. If it doesn’t happen, there will be a huge selloff.
But who will be the real winner when the printing presses in Frankfurt, metaphorically at least, finally start to roll? The plan is for it to help the struggling economies of Europe’s periphery.
The reality is that the two markets that will benefit most are the U.K. and the U.S. Why? Because when central banks print money, it inevitably sloshes outside of its own borders, and Britain and America are far more attractive homes for that cash right now than Greece or Italy. Indeed, even if the ECB pulls back from QE the U.K. and U.S. will still come out ahead — because both are safe havens when Europe is in trouble.
Nobody knows for certain whether the ECB President Mario Draghi will finally persuade his colleagues to launch QE when they meet on Jan. 22. True, the case for the central bank to print money is compelling. The eurozone is already in deflation. Prices dropped by 0.2% in December, the lowest reading for five years (and remember, that was in the middle of a global slump). In countries such as Spain and Greece prices are falling far more rapidly than that.
Growth has weakened, and is still declining. The German engine has stopped running, and its mighty export machine is stalling. France is sliding ever deeper into a depression. Growth across the
The winners from Draghi’s QE? America and Britain
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