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Why QE3 Would Likely Be Bad For The Global Financial Markets, Unless Absolutely Necessary To Prevent Another Recession


The end of QE2 has the possibility of stimulating global financial markets, especially equity markets. This may sound counter-intuitive and may not happen. My rationale is as follows. QE2 has had a positive short term effect on US equities thus far. There, were and are, consequences for such a blunt instrument as QE2. One of these consequences has been, and still is, an increase in the complexity of ‘currency wars’ and possibly international trade to a lesser extent. By hopefully avoiding any possible form of a QE3, currency wars ( and international trade to a lesser extent, possibly ) can better flourish in an international monetary ecosystem that is more predictable and therefore more stable. It is not a matter of right or wrong, good or bad. It is a matter of NECESSITY. International monetary policy NEEDS to be better coordinated globally, as most all countries and their respective economies and financial systems are becoming ever more intertwined and dependent on one another. In my opinion, this is one of the biggest lessons that should be learned from the last Great Recession. The ever increasing pace of communication and international business, not only requires, but demands better coordination and less volatility in regards to international monetary policy.

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About Neven's Blog

My blog focuses on FINANCIAL MARKET ANALYSIS & INSIGHT from a macro as well as a micro - level point of view. The information is straight forward, honest, simplifies complex matters, questions some oversimplified matters, all while being as easy as possible for readers to understand. I primarily focus on capital and currency markets by combining insights, analysis & ideas from the fields of finance, economics and geopolitics.

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