On Tuesday 12 February, the Blavatnik School of Government hosted a seminar on ‘The Impacts of Quantitative Easing’.
Professor Colin Mayer and Christopher Allsopp, CBE joined Professor John Muellbauer and Anson Chan, Chairman of the Bonds Group of Companies, to discuss the effects of Quantitative Easing, or QE. Their views ranged from the highly pessimistic - ‘QE is a terrible idea’ – to the pragmatic – ‘It is the best policy, given the other options’.
Professor Meullbauer explained the rationale behind QE: to encourage lending and inject liquidity into a frozen system. The panellists then debated whether it had the desired effect, and whether it had created ‘collateral damage’.
Professor Mayer explained that QE can raise the value of assets, but it can also raise the value of liabilities, depressing asset prices. He believes that banks should hold more equity, although this is very expensive for private banks.
Mr Allsopp pointed out that QE is one of a raft of policies that governments must use to contain a recession.
Mr Chan presented the most pessimistic view of QE, strongly asserting that it should be stopped. He stated explicitly that it is a danger to pension funds, because the low interest rates that go with the policy depress earnings and drive fund managers to buy riskier assets. This can lead to ‘huge unfunded pension liabilities’. QE, he said, makes banks risk averse, so they only lend to ‘old money’ – big, established businesses –which eventually leads to income inequality. ‘Monetary policy cannot stop the business cycle’.
Colin Mayer is the Peter Moores Professor of Management Studies at the Said Busines School. Christopher Allsopp is Director of the Oxford Institute for Energy Studies. John Meullbauer is Professor of Economics in the Department of Economics at Oxford University. Anson Chan is Chairman and CEO of the Bonds Group of Companies.
