QE has failed. What comes next?

Demonstrators outside the Bank of England in London protesting against quantitative easing
London, Aug. 17, 2016: Demonstrators outside the Bank of England call for an end to quantitative easing (source: dpa)

  • Printing money and maintaining near-zero to negative low interest rates have failed to spur growth in Europe
  • Central bankers are still hesitant to return to more sound monetary policy
  • They have been trying to simultaneously avert a banking crisis and government defaults
  • Preventing both will become increasingly difficult; eventually, they will have to choose

Expansionary monetary policy has been in place for eurozone economies for almost five years, and the results have been disappointing. Authorities in Brussels and Frankfurt had hoped that a few months of low interest rates, unlimited support for commercial banks and implicit guarantees to worried government-debt holders would be enough to restore confidence, shore up aggregate demand and jump-start growth. That has not happened.

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