Bank of England Governor Andrew Bailey’s speech to the Jackson Hole, Wyoming annual bankers conference Aug. 28 could be characterized by its brazen opening lie, in which Bailey referred to “temporary quantitative easing measures” taken by the BOE and other central banks since 2009. Over 11 years, none of these measures have been temporary; the only episode in which a central bank, the Federal Reserve, spent six months in 2019 selling off small amounts of its QE assets, ended with the frightened Fed quickly ending the “tapering” in August as stock and bond markets plunged, and then launching a new “QE4” in October. So Bailey’s proposed further strategy, summarized, was that central banks use QE money-printing as the response to everything, and “go big and go fast” when they use it.
He opined that “some studies show” that the central banks didn’t go big enough or fast enough in the so-called Great Recession in 2009, and therefore that they could print much more money, much faster for the London and Wall Street banks and financial markets now. Nonetheless the fact that those banks and markets were saved in 2009 showed that QE was justified and proper.
Even when asked about an idealized scenario in which a vaccine quickly ended the COVID-19 pandemic and economies came surging back, Bailey said “perhaps” interest rate changes might respond to such events, but QE should be kept in place. Moreover, “Expanding the range of assets purchased is another way for central banks to create more headroom. The Covid crisis has seen a further broadening of the range of assets that central banks stand ready to purchase” — all the way to pure junk bonds and overleveraged stocks and ETFs.
