Warm up the printing press Jean-Claude!

Ambrose Evans-Pritchard reports that two key ECB governors have informed him that the ECB are at last willing to follow the British, Americans and Swiss and engage in real Quanititive Easing. QE is likened to printing money as it involves effectively creating new money and using that new money to purchase assets. By increasing the supply of money chasing the same goods and services, officials hope to stave off nominal price falls and prevent a deflationary spiral from taking hold.

In a famous speech entitled Deflation making sure it doesn’t happen here now-federal reserve chief Ben Bernanke echoed Milton Friedman by suggesting that deflation could be prevented by dropping bank notes from the sky, to be collected and spent by the populace. The moniker “Helicopter Ben” has been in circulation ever since.

QE is more complex to implement in the Eurozone, as each member nation issues and is responsible for it’s own debt. Some formula must be agreed upon for dividing up the new monies among member nations. There are also deeply held fears among the prudent Eurozone nations that they could wind up responsible for the debts of deliquent countries (most notably in Germany as Ambrose points out in his article). With all the major Western central banks either already printing, or warming up the presses, it’s not surprising that the world’s creditor nations (China, Russia et al) are gently expressing their desire for a more robust non-debasable reserve currency.

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