Investment - Articles - €1trn into Eurozone like a defibrillator on a dead donkey

 “Today’s announcement by Mario Draghi has hardly come as a surprise, but arguably has come far too late and is akin to applying a defibrillator to a dead donkey.

  

 “The key is that QE will actually be spent on investment grade debt, which seemingly rules out Greece and Cyprus. I was sceptical this announcement could take place before Sunday’s Greek election, though this now explains it. QE should already be discounted in the market, although this is a slight upward surprise in terms of quantum. The medium term market response is as yet unknown, as there was not a uniform reaction when QE was similarly enacted in the UK and US. Don’t rule out a possible rise in bond yields – which partly depends on how the "risk sharing" features work in the fine print.

  

 “One of the main problems is that the current disinflation, as with supposed "inequality", is a symptom rather than the disease, and hence people are focusing on and treating the wrong thing. Policymakers are panicked about a lack of demand when the real issue in the market is oversupply. Low interest rates and cheap credit has prevented creative destruction, kept zombie companies alive, and increased capacity, with the result that the world has more goods and services than it needs. Hence inflationary policies have actually been deflationary, while also causing a huge misallocation of capital. The eventual process of true price discovery could be very painful for some investors.”