Quantitative easing is a dangerous addiction

The FTSE-100 index of leading stocks is over 20 per cent up since Britain went into lockdown — ‘bull market’ territory. The government borrowed £55 billion in May, nine times more than the same month last year — yet borrowing costs are down, with some investors now paying to lend to an increasingly indebted nation.

Who cares if the UK economy will shrink some 10 per cent this year, as our national debt rockets above 100 per cent of GDP? Stocks are up, bond prices are up and the laws of economics have been suspended. It’s different this time — and all because of quantitative easing.

Back in 2009, with the global banking system on the brink of collapse, QE was a justifiable emergency measure. But this one-off post-crisis necessity has now morphed into a lifestyle choice. For a decade since the financial crisis, QE has pumped up share prices and suppressed bond yields, allowing governments to borrow cheaply.