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Peter Sands

Long-term effects of QE still a mystery

While many bankers and economists feel that another round of quantitative easing is needed to help kick-start the economy, one leading banker in Britain is actually warning against pumping more money into western economies. In the words of Standard Chartered banks chief executive, Peter Sands, this will jeopardise financial stability by “laying the seeds for the next crisis.”

Even so, central banks in the US and Europe are minimising fears that another round of QE is in the works. It is Sands’ fear that after having pumped trillions of US dollars and British pounds collectively into these economies, this could set the stage for huge financial problems in the coming years.

Stepping aside from other heads of banks, Sands makes his point by indicating that within the next few years these banks will need to find a way of refinancing those loans and it isn’t really clear what their exit strategy will be, if any. He further believes that at this time no one can foresee what the long-term financial consequences could be.

Sands, whose bank deals mainly in Asia, sees this power shift as moving from developed countries to the emerging world markets. However, there are some economists who agree with Sands in that they have a very real fear that this is just pushing current financial problems into the future to be dealt with then whilst others believe this is creating a ticking time bomb.

Since there has never been intervention of this magnitude by governments and banks in the past, it is not known what kind of future impact this will have and what the ramifications may be. Throughout all this controversy over the long-term effects of pumping so much money into economies, central banks throughout the west are trying to allay fears that there is a possibility that they are considering further QE.

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