It seems unbelievable now, but the history of the era of quantitative easing only dates back 13 years.
The concept was first applied in the wake of the global financial crisis. Policy makers facing systemic collapse decided to pull this unlikely rabbit out of a hat.
One commentator at the time (Warren Buffett) said that QE would give rise to ‘moral hazard’. People who stuffed up with debt and lending would avoid the noose and live to fight another day without ever learning their lessons.
Yet QE ‘worked’ in pulling economies out of the doldrums, with no noticeable inflationary impact.
It is hard to make sense of this era. Beyond the simple prosperity that resulted, there is an odd underlying feeling that basic justice was somehow skewed and basic wisdom somehow invalidated, and that macroeconomic firefighting was somehow secretly responsible.
What ought to have resulted in traumatic lessons in the true cost of debt led to nothing, and people quickly reverted to their habits of borrowing to buy houses, the Main Street flawed ideology that led to 2008 to begin with.
Little did we know that we were simply kicking the can down the road.
The flawed ideology has resulted in the creation of millions of moral hazard machines, including the biggest one ever, Evergrande.