America’s QE party is over – in Europe, it’s just about to begin

The European Central Bank is running out of options. That's great news for investors, says Matthew Lynn.

The Federal Reserve looks set to start winding up its quantitative easing (QE) programme later this year. Meanwhile, there is little evidence as yet that the new governor of the Bank of England, Mark Carney, will crank up the printing presses again. So although the Japanese may still have their foot firmly on the monetary accelerator, it looks as if the markets are going to have to get used to a world where central banks are not constantly throwing billions in freshly minted bank notes at them. That's why bond yields have started to spike up, gold has been hammered, and equity markets have started to plunge in value. The days of easy money look to be over.

But hold on. The markets are missing a very obvious point. If the Fed does end its QE programme, the European Central Bank (ECB) will have no choice but to start one of its own or else watch the single currency collapse. Why? Because the eurozone can't afford higher bond yields. That means the QE party can go on for a lot longer yet except it will be Europe driving it rather than America.

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Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.