Quote:
Originally Posted by AltaGuy
Source?
I think that's way oversimplified. And if I had to name the primary cause of quantitative easing, I would say growth - which has been positive but sluggish in most Western economies. The cynic in me would say the "primary" cause of quantitative easing is to keep money flowing in the financial markets.
But really, it's mostly about Western economies taken as a whole. I'm not sure deflation has really been a significant worry.
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Of course its an oversimplification - this is a chat forum, and if I post more than 2 paragraphs, most people won't read it.
As to the bold, we are saying the same thing: growth has been sluggish, and the purpose of quantitative easing is to keep money flowing
because the risk is that it doesn't keep flowing and growth could stall, which could trigger deflation (because the inflation rate is so slow already.
That's the point. In a normal environment, slowing growth doesn't warrant quantitative easing. The reason it is necessary is that, with the current set of global economic circumstances, deflation is an actual risk that needs to be defended against. It isn't just a lack of growth (that alone is enough), it's that a lack of growth, now, could significantly increase the risk of deflation.