Yves here. This post looks at the unwinding of quantitative easing in the UK and raises some concerns. The first is that the Bank of England will incur explicit losses due to the inevitable “buying high” and having to sell assets, which will result in lower prices. Note that the Fed has said it will effectively finesse this issue by virtue of not selling the assets it purchased during its QE program. Since a significant portion of the bonds the Fed bought were high-quality mortgage-backed securities, which amortize fairly quickly (due to home sales as a result of moving, death, disability, plus scheduled principal amortization), the Fed’s balance sheet will shrink appreciably over the next five years if it simply sits pat. Remember that a central bank, unlike a conventional bank, is not loss constrained by its nominal equity but by inflation. If a central bank’s losses become too large, it can’t continue to monetize its losses but must obtain an explicit recapitalization (this was discussed regularly by former central banker Willem Buiter in 2007 and 2008). However, a second concern is that several central banks are planning to halt or reverse QE on similar time frames. Since the one thing QE does appear to have accomplished is goose asset prices, the authors have reservations about the impact of its reversal on financial stability.
By Professor of Economics, University of Leeds, UK, and Managing editor International Review of Applied Economics and Philip Arestis, Professor of Economics at the University of the Basque Country, Spain. Cross posted from TripleCrisis
The general response to the financial crisis of 2007 onwards by central banks included large cuts to the policy interest rate and then adoption of ‘quantitative easing’ alongside many other policies of bail-outs. The low interest rate regime aided the government’s budget position by enabling borrowing at low rates. But they did little to aid recovery as economies continued to dip into and out of recession. Central Banks started to engage in ‘quantitative easing’.
‘Quantitative easing’ has been an unorthodox piece of policy comprising of two elements: the ‘conventional unconventional’ measures: whereby central banks purchase financial assets, such as government securities or gilts, that boosts the stock of money in the form of M0; and ‘unconventional unconventional’ measures: in this way central banks buy high-quality, but illiquid corporate bonds and commercial paper. In this way the stock of money is expected to increase.
The Bank of England announced on the 5th of March 2009 a £150bn ‘quantitative easing’, by buying government securities and commercial paper (£50bn on commercial paper); followed by £75bn pounds (equivalent to 5 percent of annual GDP) of the £150bn should be spent on government gilts and commercial paper, over the April-June 2009 period. Subsequently (May 2009) the latter was increased to £125bn (9 percent of annual GDP); increased further to £175bn in August 2009; and to £200bn in November 2009. In February 2010 it was announced that the Monetary Policy Committee (MPC) would monitor the appropriate scale of the QE and that further purchases will be made should the outlook warrant them; this became necessary in October 2011, when QE increased by a further £75bn; and more recently, July 2012, QE increased by a further £50bn. The MPC at its latest meeting on the 4th of July 2013, under a new chairman of the committee, decided to continue with QE.
Those of a more monetarist persuasion saw the corresponding expansion of the stock of money (in the narrow sense of notes, coins and reserves of banks at Central Bank) as inflationary in nature. But there is no evidence that this occurred, and indeed the ‘quantitative easing’ appears to have had little impact on spending. The reserves of the banks have ballooned and there has been little expansion of bank credit for investment and other purposes. Since QE involves the direct purchase of financial assets, it would not be surprising if QE at least held up asset prices. The general rise in stock market prices around the globe fits that pattern, and the falls when it is suspected that QE will be unwound.
In their recent annual report, the Bank of International Settlements warned of the issues which could arise as QE is unwound; and as a number of major countries (notably USA, UK and EMU) practicing QE reversals at the similar times would exacerbate the problems. The problems could arise from a general fall in asset prices, and specifically the effects which a fall in asset prices would have on the balance sheets of banks and other financial institutions.
Central banks and governments have so far profited from QE as the central bank purchases interest bearing assets for money. As QE unwinds those interest bearing assets will obviously be sold, and a key question becomes at what price. As interest rates would likely be rising and central banks become substantial sellers of financial assets, asset prices are likely to fall. Since QE has involved major purchases of financial assets, a relatively small fall in asset prices (more asset prices at future sale date compared with prices at time of purchase) would generate significant losses. The present purchases under the QE programme amount to some £375 billion. A 10 per cent fall, for example, would involve a significant loss for the Bank of England, and hence for the government as the sole shareholder of the order of £37 billion. The loss can be compared with the current budget deficit estimated for 2012/13 at £110 billion.
In November 2012, an agreement was reached between the Governor of the Bank of England (BoE) and the Chancellor of the Exchequers which has significance for the operation of QE. Under this agreement, the interest the BoE earns on government debt it holds will be returned to the Treasury under the terms of an indemnity provided to the Bank but unused until now in a dedicated account – the Asset Purchase Facility (APF), which is held at the Bank. The APF is a subsidiary of the BoE, which is used to carry out QE through asset purchases, funded by the creation of central bank reserves, with the MPC deciding on the level and pace of asset purchases through the APF as part of monetary policy operations. The APF is financed by a loan from the BoE, and it pays interest on its loan at the going policy rate; all cash accumulated in the APF will be net of these interest payments and other expenses.
The transfers from the APF to the government should be used solely to reduce the government’s borrowing needs and its net debt. The figure rose to £35bn in March 2013 (it was £24bn in March 2012), that is £11bn increase on an annual basis, equivalent to roughly 10% of the budget deficit at £116bn in March 2013 (and 0.7% of national income). This figure comes from the fact that the APF borrows at 0.5% from the BoE and lends the same amount to the Treasury at a higher rate (it is not clear by how much in view of the different maturities of the debt involved).
The excess cash from the APF was transferred to the Treasury during the financial year 2012-2013; in the future, and on a regular basis, any additional interest payments received by the APF will be handed back to the Treasury at the end of each quarter, after deducting relevant costs. The conclusion is, then, that the Treasury, not the BoE, undertakes QE of its own. It would appear that the dividing line between the BoE ‘independent monetary policy’ and the Treasury’s budget plans is becoming rather obscure. Does this mean the beginning of the end of the notion of ‘independent monetary policy’?
The QE programme does not appear to have been a great success in the promotion of economic recovery, though it has held up asset prices. As the QE programme unwinds it is likely to involve the central bank and government in substantial losses, and to have consequences for the stability of the financial system.
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The central bank selling government bonds is precisely the same as the government issuing government bonds. It drains reserves and swaps for higher yielding assets.
The APF may be a technical subsidiary of the Bank of England, but due to the indemnities it is actually a financial subsidiary of HM Treasury. The Bank of England doesn’t consolidate APF into its accounts for example since it has ‘no financial interest’ in it.
So essentially the whole charade is a way of HM Treasury getting a loan from the Bank of England. Something that is obvious if you consolidate the balance sheets of HM Treasury and the Bank of England.
“As the QE programme unwinds it is likely to involve the central bank and government in substantial losses, and to have consequences for the stability of the financial system.”
Scratch “government”, insert “U.S. taxpayers”. We should not forget that QE and the Fed in general don’t give a rat’s ass about the real “economy”. What they’re concerned about is keeping the “system” stable, stable enough such that they can continue their systematic wealth extraction and profit skimming operations. Who are we really kidding here?
I agree Logic. I suspect the banks have been stashing cash in select shell companies waiting for the fire sale.
Agree. QE has not helped the real economy; it just kept the old one from total collapse. If QE were meant to help the real economy it would be made permanent so that the trickle-down (that is all it is) could reach the roots of the economy in a meaningful way. To end QE without something to replace it will destroy even the rich and greedy. So logically any plans to taper will have to be offset by governments stepping in with a direct infusion of jobs in education, health care, infrastructure and clean-up, new housing, etc. I’d just like to say goodbye and good riddance to the pretend trickle-down of “Independent” Monetary Policy.
Financial losses for a central bank need not involve any taxpayer losses. A central bank is not capital constrained and can function perfectly well in a state of negative equity indefinitely.
“Financial losses for a central bank need not involve any taxpayer losses. A central bank is not capital constrained and can function perfectly well in a state of negative equity indefinitely.”
That’s all well and good in a philosophical sense, but here in the real world we have to deal with the constraints of hubris, greed and corruption which are intertwined with that central bank you are referring to. It’s one thing to muse about how a system could operate functionally if it were free from compromise; It’s another thing altogether once you throw the flaws of human nature into the mix.
If you have a plan for how you are going to eliminate those constraints and get to that Utopian system where we can all live happily on free money printed from thin air, I’d love to hear it. Something tells me a metaphysical journey down the rabbit hole isn’t going to solve this one.
… in the real world we have to deal with the constraints of hubris, greed and corruption which are intertwined with that central bank you are referring to.
That’s all true, but it has nothing to do with the question of whether we should worry about the Fed running an operating loss. Those factors you mention will still be present whether the Fed shows an annual profit or an annual loss; and whether the Fed balance sheet is in a condition of positive “equity” or negative “equity”.
My point is that the very notion that a condition of positive central bank equity is an indication of central bank health or soundness, and that a condition of negative equity is an indication of central bank failure or unsoundness, is another one of those fallacies analogous to the comparison of of the US Treasury to a firm or household.
The Fed, as the emitter of those fundamental USG liabilities known as “dollars” has no financial constraint. It is not dependent on outside sources for financial capital, and its net worth is not to be measured in conventional financial terms. It can operate in a condition of deepening negative equity indefinitely, so long as the annual operating loss does not exceed a prudent amount beyond which it would induce unacceptable inflationary pressures.
If the Fed is running a profit during a period of high unemployment, low growth and low inflation, and thus returning lots of dollars to the US Treasury, that might be a good thing if the Treasury is using the dollars to expand its spending. But if the Treasury is instead using the dollars to pay down debt – as it is – then the joint Fed-Treasury operation is a contraction of private sector financial assets and recessionary. The government is vacuuming dollars out of the economy when it should be emitting more of them.
The fact that the Fed is reaping big earnings right now should be setting off warning bells, and not be viewed as a cause for celebration. And likewise, the fact that the Fed might at some point show negative earnings or even negative equity is in itself no cause for alarm.
More metaphysical feces.
To quote one or your more recent posts…
“But it is crucial to recognize that banks do not and cannot simply manufacture their own assets – whether from thin air or otherwise.”
WTF! Are you seriously suggesting that banks have not and cannot manufacture, a.k.a. cook their books? We know they have, and continue to do so. If we were to mark to market each and every one of our beloved TBTF institutions tomorrow all hell would break loose. The central bank is no more independent from this mess than your average Congressman. Waxing about the possibilities of supposedly benign manipulation by corrupt central bankers is equally ludicrous. Why do you think it’s going to take Germany 7 years to get it gold back after requesting it in January….BECAUSE IT’S NOT THERE!
Sorry, I can’t follow your reasoning.
Not surprising. See Mr. Haygood’s remarks regarding Federal Reserve PhDs below. I can only assume the same affliction applies to various PhDs in philosophy as well.
Or as Jesse would suggest, “Stand And Deliver”
Transparency, Truth…LOL! The Fed wants, and will provide neither.
http://jessescrossroadscafe.blogspot.com/2013/07/more-on-german-gold-situation-some.html
If you are naive enough to believe banks do not and cannot manufacture their own assets, then you certainly won’t want to read this either….yet another stealth bailout of the banks that the Fed doesn’t want to mention.
http://www.mauldineconomics.com/ttmygh/what-if
If the gilts go down 10% long term interests go up and by a lot more if there is a run on gilts. QE has been different in the UK, US and Japan because different stuff was bought. It did hold up asset prices and give banks more reserves. They didn’t loan any more out to productive business – which is a very bad sign if the banks know anything about such investment, i.e. they don’t believe it would pay off and so don’t believe in our future. One might say in favour of QE that the banks may have lent less and foreclosed more without it.
In Britain we have each bought £6K of government bonds that are lodged in some asset purchase fund in the BoE along with some weird interest dodge. I understand no more.
It is not that unusual for manufacturers to ‘sell’ their own products in odd ways like channel stuffing, repos, claiming sales on unloading at a dockyard and so on. The hope is that profit-related bonuses (and share selling on inside knowledge) will be pocketed and some business cycle upswing will clear the decks before the accounting cycle catches up. QE has coincided with the end of a long bull market in bonds (gilts here) and the start of a probable, long bear phase. Channel stuffing and the rest soon feed back to production cut backs and share price problems if recession continues in a lack of consumer confidence (bear) phase.
My guess is we have not been told anything near the truth and the fatal nexus is ahead of us. The banks will turn out to be and have been in much more trouble than declared needing more bail outs. Governments will want QE back to pay down deficit. The new money any Ponzi relies on won’t be there because wages are held down and private debt will be a priority to pay back ahead of spending for those with decent pay, and in increasing ‘Wonga’ albatross for others. Surely, if growth was coming the banks would be in on it and they are not. Japan 2 would be a good outcome!
Of course, Euroland or bits of it might collapse making UK and US bonds attractive to fleeing money – there are many contingencies. If a 4% asset deflation is enough to screw many banks because of leverage, how much QE unwinding might trigger this? What effect would the money of the 1% have if we used that to pump the Ponzi? Please email spreadsheets to my new off-planet address c/o Elvis!
“In their recent annual report, the Bank of International Settlements warned of the issues which could arise as QE is unwound; and as a number of major countries (notably USA, UK and EMU) practicing QE reversals at the similar times would exacerbate the problems. The problems could arise from a general fall in asset prices, and specifically the effects which a fall in asset prices would have on the balance sheets of banks and other financial institutions.”
This seems to me to give each central bank a strong inentive to be the first to unwind. As mentioned on the unconventional unconventional side of things all these central banks hold a lot of these assets. If the unwinding of QE does cause a large drop in asset prices the last bank to unwind will be left un an unenvyable position. Unless things are coordinated this will leave central banks either racing to unwind first or totally unable to unwind.
This is my naive reading of this. Am I correct?
I certainly have no idea how much damage unwinding QE will or could cause. My impression, on the political front, is that the central banks of the major countries involved have agreed to act in a coordinated way as much as possible and have the permission from the nation state’s political leaders to do so. These series of arrangements have, in my view, kept things relatively stable internationally and will continue indefinitely.
I’ve always seen QE as smoke and mirrors–my guess is that when all this plays out the smoke will have cleared and they’ll be left with only mirrors–but in the meantime they’ll have time to arrange them in some new creative way.
Since “MARK-TO-MARKET” accounting has been suspended, how does it affect the banks? They can carry the collateral at full value and thus it is business as usual for them!
“If a central bank’s losses become too large, it can’t continue to monetize its losses but must obtain an explicit recapitalization (this was discussed regularly by former central banker Willem Buiter in 2007 and 2008).”
I don’t pretend to fully understand all of the accounting issues at play here, but it does seem to me that a lot of this is about accounting. Particularly given the size of the losses that is likely to be involved, can someone explain to me why the political exit strategy won’t be to simply change the accounting rules– for example, to fail to recognize those paper losses by simply converting them as they occur over time to non-amortizing assets similar to goodwill? Under this strategy, there is no hit to the income statement and no impact on the balance sheet.
Moreover, an asset reclassification such as this in and of itself couldn’t be inflationary– the cash used to acquire these assets was generated long ago when the assets were purchased. All it would do would be to permanently bury once and for all the underwater securities and the trail of fraud and deceit which led to their issuance in the first place. What strategy could better suit those in charge of the whole shell game? Why isn’t this the likely outcome?
I think something like you say is likely going to be the outcome. We have to understand that in a fiat currency system that is, largely, supported by all the big players arbitrary rules and values to assets can simply be written in. Markets today are built, in reality, on fictional values which turn into “real” values because all the players agree. I see it as a game with established rule as in basketball–players agree that referees will govern the flow of the game and certain actions are fouls–some will flop in order to make it appear a foul is committed and the other player will complain but the game goes on because all have agreed on the limits of the game. Our financial system has been gamed in the fullest sense of the word. The 2008 crisis showed that all actors had to, at all times, act in concert to maintain the game–this is the real reason why criminal prosecutions were discouraged–all players had to be “in” other than the few who were seen as outcasts–Bernie Madoff and others.
It is also why experts and economists were wrong on predicting a double-dip recession and ultimate financial catastrophe–it never even came close to happening to the system. Of course citizens of some countries had to pay the price but their institutions and political leaders weren’t sufficiently vested in the system.
It is indeed about accounting. In a Jan. 2013 Federal Reserve paper by Seth Carpenter et al, the authors claim that ‘Federal Reserve accounting rules’ already provide for treating portfolio losses as a deferred asset.
http://www.federalreserve.gov/pubs/feds/2013/201301/201301pap.pdf
Even if that is so, it would be an unprecedented application of the rules, involving unprecedented magnitudes. Equally unprecedented would be the projected cessation of Federal Reserve remittances to the Treasury, currently in the tens of billions annually.
As the hundredth anniversary of the misbegotten Creature from Jekyll Island approaches this December, it is headed for a political sh*tstorm that may swamp it.
What do you call a hundred Federal Reserve PhDs at the bottom of the sea? A GOOD START!
Remittances tot the Treasury go up and down. For example, in 1997 there was no remittance to the Treasury, and in 1998, less than $9 billion was remitted. Current remittances in the high tens of billions are historically very unusual. Given the Fed’s operational interest rate target, a situation in which their are no remittances will also be a situation in which the economy is growing again, the treasury’s other sources of revenue are increasing, and transfer payments are automatically decreasing.
Exit Strategy Hysteria 2013 is just another version of Debt Hysteria 2009-2012.
Maybe they can take a few philosophy PhDs with them. We can always hope!
As Yves noted in her intro to this article, it is unlikely there will be material asset writedowns at the Fed under current accounting rules as Bernanke has already said the assets purchased under QE will be held to maturity.
It is the second concern that Yves, the author, and the BIS expressed and its implications for global liquidity, financial asset prices and financial stability that I believe will prove to be a pivotal issue.
The article highlights the evolving situation in the UK and with the BoE. Yves has provided a contrast to more recent Fed machinations of its intentions. I recommend a read of a recent piece by Benn Steil, Director of International Economics at CFR, titled: “Bernanke Should Follow the Advice He Gave to Japan”.
http://www.cfr.org/monetary-policy/bernanke-should-follow-advice-he-gave-japan/p30626
In this country, a lot depends on the quality of the assets in the CB portfolio.
If the FRB will ‘hold-to-maturity’ its MBS’s, then there will be no transaction on which to book any losses, even as deferred assets.
Also if Tsy’s sell at a loss based on interest rate changes, and those losses book as an FRB deferred asset, then the CB itself, and the banking industry, is in the clear, and it is the lowly taxpayer on the hook for Bernank’s liquidity play as the Bankers’ Bank.
This definitely raises the foundational issues raised in this article’s conclusion:
“”The conclusion is, then, that the Treasury, not the BoE, undertakes QE of its own. It would appear that the dividing line between the BoE ‘independent monetary policy’ and the Treasury’s budget plans is becoming rather obscure. Does this mean the beginning of the end of the notion of ‘independent monetary policy’?””
Compare that conclusion with the recommendation in Steil’s paper.
Well, yeah, when the losses to the taxpayers involve many hundreds of Billions, and the bankers walk away from the Bernank play smelling like Roses, then it is time to reconsider the matter of public money administration as a means of reversing these outcomes.
Because we ain’t close to being out of this thing yet.
I agree with that conclusion, but it really means that the whole idea of an “independent” central bank is a political illusion to begin with. The treasury and the central bank always coordinate.
The level of coordination of monetary policy between the Fed and Treasury are as settled in the Accord.
The Fed is in charge of money, independently.
The problem arises from the central bank coordinating the Treasury’s hand into the pockets of the taxpayers to save the debt-industrialists, a.k.a., the banking industry…….. through monetary policy.
It’s not joining Fed and Treasury that is necessary, it is putting the Fed under Treasury in the operation of the money system.
Technically, central banks can unwind QE pretty easily. They first stop buying new securities, then they allow existing securities to mature (or sell them off). The ‘cost’ of unwinding is lower asset prices/deflation/whatever you want to call it.
Politically, though, they’re trapped. The BOE, ECB, BOJ, and Fed are just doing what they’re told. Look at how pre-QE warnings even from within the establishment, like the World Bank’s Simon Johnson, the Fed’s Thomas Hoenig, Clinton Administration figure (and the World Bank’s) Joe Stiglitz, Clinton Administration figure Robert Reich, CFTC head Brooksley Born, and others, were ignored. The more general transfer of wealth upward via wage stagnation has been largely completed; direct money printing now remains as the only major source by which the political class can transfer additional wealth from the public to connected insiders over the coming years.
Without it, there would be nothing to skim off the top for the hospital franchises and noninvestment banks and drug dealers and mercenaries and debtors prisons and NAR money launderers and pornoscanners and all the rest.
London, so far, has been on the same page with Washington.
Hussman has been on the deferred “assets” for a long time:
“Based on the tight historical relationship between the monetary base (per dollar of nominal GDP) and short-term interest rates, we estimate that the Fed would have to contract its balance sheet by more than $500 billion simply to engineer the first quarter-point increase in the Federal funds rate. [..] Meanwhile, with a monetary base of $3.27 trillion and an estimated duration of at least 7 years on present Fed holdings, the recent 100 basis point move in bond yields has created a loss of over $200 billion for the Fed. The Fed reports capital of only $55 billion on its consolidated balance sheet. but then, just like major banks, the Fed does not mark its assets to market. Most likely, the Fed is now technically insolvent. Moreover, the Fed is levered more than 59-to-1 even against its stated capital. [..] Not that any of this matters, provided that nobody cares that the Fed has very quietly strayed beyond monetary policy and into fiscal policy. See, the Fed calls the interest on the bonds it holds “profits”, which are returned to the Treasury, while the Fed calls its losses a “deferred asset.” In Bernanke’s words, the losses of the Fed are an “asset” in the sense that they result in a reduction in the amount of future payments of interest handed back to the Treasury (and the public) as that interest is received by the Fed. Put another way, the public will end up paying interest on Treasury bonds, to fill the hole in the Fed’s balance sheet, and without that interest being handed back to the Treasury for public benefit. All this, without the need for any Congressional budget item. The larger the loss, the larger the “deferred asset” on the Fed’s books. This is as Orwellian as one can get.
http://www.hussmanfunds.com/wmc/wmc130715.htm
“All this, without the need for any Congressional budget item.”
But it does take Congressional action. That’s what creates the spending in the first place. The Fed action is at the end of the line (not the beginning). The QE assembly line is something like this:
President and Congress want to spend dollars –> President and Congress don’t want to tax existing dollars, so they need new dollars via debt issuance –> Treasury (and GSEs) sell securities to obtain dollars –> private buyers don’t want to pay the high prices (low interest rates) that President and Congress need to do all their spending –> so Fed buys some Treasury (and GSE) securities at above-market prices (low interest rates) from private buyers via QE.
Technically, QE is new dollars created by the Fed out of thin air (the government possesses an infinite number of dollars), but that’s not what drove the process. Rather, it is the initial budget appropriation that was the money printing. The rest of the chain is just the mechanics for how money printing works in our particular system of political economy where politicians want to spend lavishly on corporate welfare but they do not want to tax the wealthy to pay for it.
Well, they call it a an “asset” of the Fed because it represents a permanent reduction of the Fed’s “liability” to the Treasury. But it’s all one government, so these kinds of interagency claims against each other are moot.
One thing to note is that if the Fed is making an accounting profits, then the transactions with the private sector that generate that profit represent a net loss to the private sector – which may or may not be recycled back into the private sector, depending on spending policy by Congress and the Treasury (which is currently bad). A Fed profit is not necessarily a good thing. Also, if the Fed leaves financial assets in the private sector in such a way that the Fed’s earnings are less, then private sector capital gains will be higher and capital gains taxes.
One thing to note is that the Fed is the problem, not the solution.
Well, personally I would be happy to socialize the banking system, and move all of the essential operations of the Fed into the Treasury department. I just think it’s a bad idea to go down the road of another wave of panic and hysteria – like the Exploding Federal Debt hysteria, the Hyperinflation Bomb hysteria, the Global Gold Heist hysteria, etc.
If people want to remake the financial system and undermine the plutocracy, they need to know both what the current system is and what it isn’t, and stop manufacturing these crude bogey-men. The real problems are hard enough.
“I just think it’s a bad idea to go down the road of another wave of panic and hysteria.”
And that, dear sir, is what we are talking about with the failure of the intellectual class. Using the fear card to keep the system intact just gets you more of the same…more fraud, deception and lies. It’s the same argument trotted by then Treasury Sec and the banking establishment before they gave the American people one of the biggest screw-jobs in history. Write us a blank check, and do it now or the system will blow up! LOL!
Fortunately, more people are beginning to see the web of lies for what it really is.
Explain to me how I want to keep the system “intact”?
In my view, efforts to overhaul and reform our financial system are hamstrung by the army of cranks and ninnies out there who keep warning of disasters that don’t occur.
It’s hard to hear coherent critics above the din of the crackpots.
if UK QE is mostly in govt bonds, and the paper profits go to the treasury, why would they sell them at all?
To raise interest rates.
QE has to be seen for what it really is an attempt by the Plutocracy to goose under water asset sheets under the mistaken notion that restoring companies balance sheets to health after a Bankster’s bubble undermined them will be a main driver out of the recession. In a sense this is a supply side operation which whilst ostensibly worthy fails to recognise that the underlying problem of many Western economies was in the first instance a demand side one. A failure to recognise the old Keynesian maxim spending equals income. The following two articles expand this perception:-
http://www.newamerica.net/publications/policy/america_s_exhausted_paradigm_macroeconomic_causes_financial_crisis_and_great_recession
http://www.paecon.net/PAEReview/issue58/Koo58.pdf