Morning Must-Read: Tony Yates: ECB QE. Much too Late and Not to Be Counted on
Tony Yates gives an even more pessimistic assessment of Eurozone QE than I gave yesterday.
But it is hard to disagree with him, and to be even as less-pessimistic as I was yesterday.
And that even this small, tentative step which carries no risks whatsoever that I can see excites such extraordinary opposition is a very bad sign for the Eurozone as a whole.
The German establishment appears to have decided that forcing “reform” in southern Europe is its only policy goal. I do not know whether they think it is worth risking the break up of the European project or are just ostriches. I don’t know whether they think it is worth risking recession in Germany, believe that a deeper crisis in the south will lower the value of the euro and produce a German boom and thus that recession in Germany is not a risk, or are just ostriches:
…that the ECB has handled the crisis… and the disputes that have raged about whether and how to do QE… minimise the bang per buck…. Second, in so far as QE works by signalling intentions about future central bank rates, there is now little to be got…. Third, in so far as QE acts through lowering term, liquidity or other premia, it’s too late for that too. Something has squeezed those premia out in Northern countries. And the risk that the remaining premia in the South reflect is not going to be taken off the local sovereign balance sheet…