€urosclerosis: not taking the easy way out


Draghi Plays Down Hopes for Quantitative Easing


FRANKFURT—European Central Bank President Mario Draghi Thursday rejected suggestions that the ECB should embark on quantitative easing as a means to boost the euro zone’s economic performance, which has been dragged down by the region’s sovereign debt crisis.

“I don’t think quantitative easing leads to stellar economic performance. I see no evidence that quantitative easing greatly boosts the U.K. and U.S. economies,” Mr. Draghi said in response to a question after giving a speech in Berlin.

Mr. Draghi reiterated that the ECB’s purchases of government bonds, which many market participants and politicians said should be stepped up, are “neither eternal, nor infinite.”

He said it takes more than monetary policy measures to restore market confidence and that European governments must immediately announce clear steps toward fiscal consolidation.

Much more at the link.

“Quantitative easing.” It sounds so much more technical, so much more exotic and informed than “printing money,” doesn’t it? Of course, one definition of quantitative easing says it is sometimes “dubbed incorrectly ‘printing money,’ a central bank simply creates new money at the stroke of a computer key, in effect increasing the credit in its own bank account.” Yet, if you read the whole definition article, you’ll note that the risks of quantitative easing are just the same as the risks of simply printing money to get a country out of a recession.

What I find interesting about all of this is that the United States has engaged in some quantitative easing measures during the current economic slow-growth doldrums, and the United States has engaged it exactly what President Obama has told the Europeans they shouldn’t do, borrow large sums, much of it from foreign investors, to stimulate the economy, and these tactics still haven;t worked. As Signore Draghi noted, he saw “no evidence that quantitative easing greatly boost(ed) the U.K. and U.S. economies.”

Our economy is slowly improving; we’ve been out of the recession, technically, since the end of the second quarter of 2009, but growth has been slow. As was noted here, there are some signs that things are improving, but we don’t know yet if those encouraging signs will pan out, or we’ll be disappointed again.

The best thing we can do is to simply do nothing, and let the economy work itself out. That’s unsatisfying, and goes against the grain: people expect our leaders to “do something” when times are bad. But sometimes doing nothing is better than anything else.

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