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The failure of QE
The Emerging View
23 April 2015
Quantitative easing (QE) is failing. Instead of funnelling funds into the real economy, the policy is
inflating bubbles in both equity and bond markets in the HIDCs (Heavily Indebted Developed Countries).
Lately, as many HIDC bond yields approach zero, QE money is migrating into currency markets where
it is causing growing volatility, which is now beginning to create serious economic problems.
These unintended consequences are undermining the effectiveness of QE and the failure of
governments to reform and deleverage is compounding the problem. Today, a major attraction of
Emerging Markets (EM) fixed income investment is one of insurance against large permanent loss –
in EM you can still be confident that you are not buying into a bubble.