The final word on quantitative easing will have to wait for historians. As the US Federal Reserve winds down QE3 we can at least conclude that the experiment was a huge success for those countries that acted quickly and with decisive force.

Yet that is not the ultimate test. The sophisticated critique - to be distinguished from hyperinflation warnings and "hard money" bluster - is that QE contaminated the rest of the world in complicated ways and may have stored up a greater crisis for the future.

What we can conclude is that extreme QE enabled the US to weather the most drastic fiscal tightening since demobilisation after the Korean War, without falling back into recession. Much the same was true for Britain.

The Fed's $3.7 trillion of bond purchases did not drive up debt ratios, as often claimed. It reduced them.

Flow of Funds data show that total non-financial debt has dropped from a peak near 260pc of GDP in 2009 and since stabilised at 237pc of GDP. Public debt did jump, matched by falls in household and corporate debt ratios.

On cue, federal debt is now falling as well. The deficit is down to 2.8pc of GDP, low enough to erode the debt ratio in a growing economy through the magic of the denominator effect.

This is not a "pure" economic experiment, of course. There are other variables: the shale boom and the manufacturing renaissance in chemicals and plastics that it has spawned; quick action by the US authorities to clean up the banking system. Yet it is indicative.

By contrast, the eurozone carried out its fiscal austerity without monetary stimulus to cushion the shock, lurching from crisis to crisis as a result. The region has yet to reclaim it former levels of output, a worse outcome than during the Great Depression by a wide margin. Not even the 1840s were this bad. You have to go back to the Thirty Years War in the 17th century to trump the economic devastation of EMU.

The eurozone's public debt ratios have rocketed, yet unlike America there has no been no drop in private debt to compensate.

David Fuller's view

Here is a PDF version of AEP's article.

This is an accurate description, in my opinion, and Germany deserves part of the blame (or credit, if you will) for restraining the ECB’s hand under Mario Draghi.  However, please read on because Ambrose Evans-Pritchard explains the many risks that the global economy still faces.  There are always risks, of course, unless one believes in a Panglossian economy.  Nevertheless, AEP’s summary is comprehensive and appropriate for Halloween.

Japan’s massive additional stimulus, which was not known when AEP wrote this article on 29^th October, has stoked the monetary fire which is lighting up stock markets today.  It will not persist indefinitely, of course, but is does demonstrate once again that monetary policy is the major short to even lengthy medium-term moves in stock markets.