There is nothing new about QE. The Bank of England conducted variants of it in Napoleonic times, watching the weather vane for easterly winds up the Thames. It would calibrate liquidity needs by buying Gilts as the ships came in. The Venetian Grain Office did much the same in the 14th Century. The Genoese and the Flemish had their own variants.

The QE policies now seen as dangerously novel were plain vanilla in the inter-war years, then known as open-market operations. John Maynard Keynes wrote in his Tract on Monetary Reform in 1923 that such policies should be used "a outrance" to battle the two evils of inflation and deflation. The US Federal Reserve launched a bond-buying blitz in 1932, after the US Congress ordered it to do so.

The Fed's $3.2 trillion bond spree since 2009 has certainly been imperfect. It has fuelled asset bubbles, not by mistake, but by design. Fed chairman Ben Bernanke puts much faith in the wealth effect, the trickle down theory that understandably disgusts Pope Francis in his latest apostolic exhortation. If it were done again, at least some of the stimulus should go straight into the veins of the economy through public works projects. But let us not quibble. 

David Fuller's view

This column is sufficiently broad in its coverage of not only the USA, European Union, UK and Japan to interest all subscribers.  It is also sufficiently opinionated, albeit intelligently so, that you will probably find points to disagree with, or at least question. 

 Ambrose Evans-Pritchard is no fan of European Bureaucracy but he does not mention the effectiveness of the ECB’s Mario Draghi who is a brilliant central banker, in my opinion.  Fortunately, he is also a sophisticated diplomat with the toughest job imaginable.  I credit him with Europe’s modest recovery to date, and that is no small achievement from the depths of depression for a number of countries.  Whatever one’s views on the EU, Draghi prevented a disorderly and catastrophic break up which would have made the global economic crisis much worse.     

 Here is Draghi’s latest battle, discussed by Bloomberg this week: Draghi Says Bank resolution Plan May Be Too Cumbersome.

 Who would have believed 2013’s performances of Europe’s stock market indices as of this Friday’s close?  The column to look at is the far right because it shows year to date performances in USD.  Germany is actually a fraction ahead of the S&P.  Spain has experienced depression conditions for several years but its stock market has gained nearly 23% this year.  The Euro STOXX 50 Index has appreciated by nearly 20%.  In another surprise for many, look at the second column in from the right in the first chart above.  It shows stock market performances in local currencies and the euro has outperformed the dollar this year.

 Europe also has a number of attractive and reasonably valued Autonomies.  For instance, here is BMW which continues to show an overall upward bias.  A decline back below €70 would be required to question overall upward scope.  BMW currently yields 3% and sells at a current and also estimated p/e of 10.6.