OECD countries are about to change over to even more expansionary monetary policies: What will be the consequences and how effective will they be?

- "The United States, the euro zone and Japan are faced with less positive economic situations than what the governments expected:
• renewed slump in growth in the United States due to labour market and property market problems, ongoing deleveraging and balance sheet adjustments;
• prospects for slower growth in the euro zone due to the weakening of global trade, the rise in savings, the profitability problems in several countries, the reduction in fiscal deficits and deindustrialisation;
• risks on growth in Japan, since it is still linked to exports and since the yen continues to appreciate."
- "Fiscal policies cannot be made more expansionary, so governments and central banks will use monetary policies once again: additional stimulus from banking liquidity, reinforcement of quantitative easing and credit easing, etc."
- "We believe these monetary policies, which will be even more expansionary, are:
• ineffective because liquidity is already extremely abundant and credit demand is declining; and because the real problem is not of a monetary nature: it is the distortion of income sharing at the expense of wage earners and, in Europe the United States, the balance sheet adjustment;
• dangerous, by making it even more likely that speculative bubbles will reappear in the future."

Natixis Flash Economics 444 20100909