EDITOR'S LETTERMerryn Somerset Webb
Quantitative easing in Europe is inevitable
At the MoneyWeek conference 2012, the editorial panel were all asked where they would put their money to work for the next 12 months. Almost to a man (and me) they said somewhere in Europe – mostly either Germany or Italy. That has worked out pretty well.
But here’s the interesting bit. When they were asked again this year, a good many of them said much the same thing. James Ferguson, a regular writer for us, and also a founding partner of the Macrostrategy Partnership, made the case. It is, he says, all about quantitative easing (QE).
The point of QE in most of the countries in which it has been introduced has been to fix the balance sheets of their banks and to prevent a collapse in the money supply as those banks rein in lending. That’s worked. America has managed – more or less – to fix its banks without actually seeing a contraction in money supply. Britain is on the same path.
However, a whopping side effect of QE has been fast-rising stock markets and fast-falling currencies. Look at a chart of QE alongside one of the rise in the US and UK markets, and you will see they move almost dollar to dollar, pound to pound, for example. This makes the US market in particular a risky place to be.
• Read the full editor’s letter here: QE in Europe is inevitable.