Hi Matt It’s correct that monetary policy (QE) has failed to create inflation or growth. For instance, the Fed doesn’t create money via QE – they credit the reserves of the commercial banks and then the commercial banks can create money via loans. Over the last decade, however, banks have been unwilling to lend (tighter standards and rising capital ratios) and many consumers have been reluctant to borrow (those that want to borrow are the ones excluded by tighter standards). As a result, QE has not led to an increase in money supply, growth or inflation. It doesn’t help that the central banks themselves claim that their efforts unequivocally create new money. This is from the Bank of England’s website: “Quantitative easing is a tool that central banks, like us, can use to inject money directly into the economy”. This year we have seen an increase in money supply because of fiscal policy, including wage and job support and this (rather than monetary policy/QE) has led to the rise in M2, which does now have inflationary potential. We still don’t know, however, if these savings will become consumption or kept in reserve for a rainy day. It’s also worth watching the Russell Napier/Brent Johnson interview where they discuss the US guarantees that could free banks up to lend more and finally boost lending. The switch from monetary policy to combined fiscal and monetary policy (in which fiscal will take the lead) is seen by many as the potential catalyst for higher inflation. Roger

Many thanks, Roger! This is great feedback. All the best over Chrissy and have a Happy New Years!