Will the billions work?

Another day, and yet more billions pumped into the bond markets.

Another day, and yet more billions pumped into the bond markets.


The latest headlines focused on the multi-billion dollar move by the Federal Reserve. But the Bank of Japan has also increased its bond purchases and the Bank of England is in the midst of quantitative easing.


Yet there seems to be virtually no discussion of the assumptions underlying such measures. Apparently there is near universal agreement that the problem facing the global economy is troubled financial markets. These are in turn seen as damaging confidence and hitting consumption.


But what if the world’s economic problems are more fundamental? What is the financial turmoil is itself an expression of deeper problems in the productive economy? No one seems to want to grapple with such awkward possibilities.


This is not an academic discussion. If the problems are more deeply rooted, the boost from quantitative easing is only likely to be temporary. The underlying weaknesses are likely to remain while governments will be saddled with huge amounts of debt.


It is possible to ignore reality for a while, but it has a nasty habit of reasserting itself.