City of London Addicts Scream for Bigger QE Fix from ECB

The amount of quantitative easing and other forms of financial “smack” that ECB President Mario Draghi announced this week that he will provide to the desperately addicted European banking system, is “pitifully small and mostly window dressing,” Ambrose Evans-Pritchard protested in a Sept. 5 column in the Daily Telegraph. They are “vague gestures and outright gimmicks … derisory … huge smoke and mirrors … mini -steps [that] will achieve nothing.”

Evans-Pritchard does the math for his addicted followers: the actual QE that Draghi announced amounts to a mere $16 billion per month, which is only one fifth of the $85 billion the Fed was providing until a few months ago. Even the Bank of Japan is carrying out QE to the tune of $70 billion per month, he notes. Even worse, Draghi said the ECB would only buy “high quality” assets from the banks, which Andrew Roberts, the credit chief at the Royal Bank of Scotland told Evans-Pritchard was “absolutely pointless. There is no point in bothering if they are not going to take any of the bad stuff off bank’s balance sheets.”

Evans-Pritchard doesn’t blame Draghi. He says the German government remains opposed to the kind of QE required, and he’s doing the best he can under the circumstances. But “the overall policy settings remain contractionary. Monetary policy is still too tight. Fiscal policy is too tight. Bank regulations are too tight.” What’s needed is a serious shot-in-the-arm, so to speak, a $1.3 trillion “blitz of sovereign bond purchases, starting immediately, and with no ifs and buts.”

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