Nick Macpherson says it’s ‘time to move on’ from QE, nearly 10 years after the financial crash, because of its unwanted side-effects
A former senior Treasury mandarin has compared quantitative easing to heroin and called for an end to almost a decade of electronic money printing by central banks.
Nick Macpherson was permanent secretary to the Treasury when Bank of England officials started buying UK government bonds to stimulate the economy following the financial crisis. On Monday, he said it was “time to move on” from QE, which is credited with helping Britain into recovery but remains in use nine years later amid concerns over Brexit.
Threadneedle Street initially began pumping £200bn into the gilt market in 2009 to boost the economy, before expanding the programme to £435bn, including an extra £60bn following the EU referendum. The bond buying scheme is similar to massive stimulus packages used by other countries, such as the US Federal Reserve’s $4.5tn of asset purchases (£3.5tn) and the European Central Bank’s €2.3tn (£2.1tn) plan.
Lord Macpherson’s call comes as pressure mounts on the world’s central bankers to give more clues about how they intend to exit QE in a process known as “normalisation” almost a decade on from the crash. Some indications could be given at a meeting of senior officials at Jackson Hole in the US later this week. Mario Draghi, the ECB governor, is expected to be the star turn at the event watched by global investors, although he is not thought to be preparing to announce the end of QE just yet.
While QE is credited with lowering borrowing costs and helping banks to lend more to consumers and businesses, critics say such schemes inflate assets owned by the richest in society, while punishing savers without large amounts of wealth.
Macpherson did not single out the specific bond-buying programme of a particular central bank. “QE like heroin: need ever increasing fixes to create a high. Meanwhile, negative side effects increase. Time to move on,” he wrote on Twitter.
The former senior civil servant was writing in response to George Osborne’s former adviser Rupert Harrison, now a fund manager at BlackRock, who had tweeted a link to a Financial Times article on pressures facing the ECB to taper its QE programme.
In another reply to Harrison’s tweet, he appeared to suggest that QE was a “policy which is yielding diminishing returns”. Harrison said people are “waking up to the impending ECB slow-motion car crash” and that there were “political constraints on eurozone monetary policy starting to bite once again”.