In theory, the QE process is supposed to create money to encourage businesses and consumers to borrow more leading to more spending and eventually economic growth.
What seemed to have happened with QE in the US and the UK is that a 'business opportunity' was created for the 'super-rich' and the rest of the economy lagged, leading to the top 1% now owning and controlling nearly half of the wealth of the UK.
Today's QE argument from the ECB is that the eurozone is suffering from deflation. But what exactly do they mean by deflation? According to supply side economic theory, deflation is defined as 'the deterioration of the monetary standard' and occurs when prices fall. The ECB is worried that eurozone deflation will create a dangerous situation because growth will stall as businesses and consumers stop spending, waiting in anticipation for prices to to fall even further.
Deflation, according to the theory creates some confusion because commodity prices fall even though the cost of living continues to rise:
The effects of government fiscal policy and monetary policy on investment decisions are constantly changing … (s)ome business sectors will benefit more than others by the effects of these policies ...ECB QE could be five times less efficient than in the US according to SocGen.
during the deflation of 1996-2001 the dollar’s value increased by about 44%. If the Federal Reserve continues causing the dollar’s value to swing upward and downward … with increasing frequency, investors must be well-advised to stay whole and to prosper.
They claim the ECB had run studies suggesting that €1000bn QE will only boost eurozone price levels by 0.2-0.8 percent, which is 'five to nine times less efficient than the US or the UK.'
Something tells me this is just the beginning