BlackRock's Hildebrand: QE Won't Work for Europe

Wednesday, 20 Aug 2014 11:03 AM

By Dan Weil

  Comment  |
   Contact  |
  Print   |
    A   A  
  Copy Shortlink
The European Central Bank (ECB) has promised to engage in quantitative easing — bond purchases — if necessary to boost the sagging eurozone economy, and many believe it will end up doing so.

But Philipp Hildebrand, vice chairman of BlackRock, says that the ECB should refrain. "This is the path the U.S. Federal Reserve took in 2008, but it would be a mistake for the ECB to follow," he writes in the Financial Times.

"Bond yields are already at record lows. Reducing them further is unlikely to stimulate investment in an economy that, unlike America's, is still funded largely through the banking system rather than the bond markets."

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

German 10-year government bonds yielded 1 percent near midday Wednesday, compared with 2.4 percent for 10-year Treasurys.

"The eurozone still has deep problems," he notes, adding that France and Italy need to reform their labor markets, lower business taxes and "continue to repair their public finances."

The fact that quantitative easing (QE) is unlikely to succeed doesn't by itself mean that the ECB shouldn't try, Hildebrand says.

"After all, another lesson from the crisis is that in the face of impending disaster, you should try different approaches until something works."

The problem is that "QE would merely enable governments to borrow even more cheaply, giving recalcitrant politicians an easy way out," he writes. And it would further distort financial markets.

As for the Fed, its easing has hampered the economy by pushing Americans to keep $10.8 trillion of their money in cash, bank accounts and money-market funds that pay very little interest, says MarketWatch commentator Rex Nutting.

"In essence, there's $10.8 trillion stuffed into mattresses," he writes. And that's not good for the economy, Nutting points out. "An economy can't really grow if no one's willing to gamble on the future."

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

Related Stories:

© 2014 Moneynews. All rights reserved.

  Comment  |
   Contact  |
  Print   |
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

Yellen Doesn’t See Fed Raising Interest Rates Before April

Wednesday, 17 Dec 2014 20:31 PM

Signaling she's in no hurry to raise rates, Federal Reserve Chair Janet Yellen said the central bank is unlikely to move . . .

Leon Cooperman: Cuba 'Very Far Down on My List' for Investing

Wednesday, 17 Dec 2014 17:32 PM

While the U.S. government's decision Wednesday to resume full diplomatic relations with Cuba stirred starry-eyed talk of . . .

Ending of Cuban Embargo 'Will Be Fantastic' for Cigar Fans

Wednesday, 17 Dec 2014 17:15 PM

President Barack Obama's decision to resume full diplomatic relations with Cuba has made happy campers out of cigar reta . . .

Most Commented
Top Stories

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved