The European Central bank is currently having an internal debate on whether or not they should start purchasing large amounts of government bonds. The president of the ECB announced they wished to increase the assets on their balance sheet by $1.2 trillion. It was a controversial topic within the ECB as six or seven of 24 board members, and three of six people on the executive board opposed the proposition. I think quantitative easing is something the ECB should enact after seeing the success it had in the U.S. The Euro zone is facing dangerously low inflation and increasing the money supply with quantitative easing could be just what they need. In an area where so many countries are intertwined, deflation could be a very huge problem, which is why most members of the ECB are so eager to act. I think if the dissenters have their way and the ECB fails to act then the Euro zone could likely see some deflation which could have negative global effects.
http://www.economist.com/news/finance-and-economics/21636107-rift-top-ecb-dangerous-draghi-and-dissenters
I believe that it would be smart for the ECB to start purchasing large amounts of government bonds. Deflation is one of the most devastating issues for a country, so they should do anything in their power to prevent deflation.
ReplyDeleteEurope is a more difficult situation because of the different countries and economies. However, Europe has run out of options to bring the economy up and stop deflation. QE is one of the best options for the ECB to bring the economy back up. The ECB should look to how we (the US) had attacked the problem and follow suit.
ReplyDeleteI also believe that the ECB should take action because they seem to have no other option. Also if they were to not act they would be a multitude of economies that would be affected, because of how they are all intertwined like you mentioned.
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