Audio: To QE or not to QE, is the only question?

In this exclusive open-access audiocast, Beecroft evaluates the success of quantitative easing to date, and looks at the implications of a third round in coming months.

He cites a failure to significantly boost bank lending in the US and the UK to debate assertions quantitative easing has far-reaching and profound consequences in economic fundamental or psychological terms.

"It's driven the US dollar down to new recent lows against major currencies and emerging market currencies, intensifying the so-called currency wars tension," says Beecroft. "It's driven up the price of gold and other precious metals, base metals, agricultural commodities and, of course, equities. One suspects the effect on key yields such as 10-year US treasuries in the order of 25 to 50 basis points."

Meanwhile in Europe, Beecroft says the "massive political will" for the euro's survival by Germany and France will also see yet further expenditure. On May 3, it emerged that Portugal would recieve a €78 billion bailout with clause to raise at least €5.5 billion in privatisations, cut some tax deductions and central government spending.

"We're witnessing a desperate struggle to ensure the zone gets through to 2013 when the European Stability Mechanism takes over from the European Financial Stability Facility, and contributing governments will become senior creditors to those private creditors," he says.

Also increasingly likely is a Greek debt restructure. Says Beecroft: "The market seems sanguine about the possibility of restructuring despite ultimately involving €200-300 billion in losses for banks around the eurozone - maybe the market is sleepwalking into a global crisis 2.0."

Combined with the determination of the US Federal Reserve to keep printing money, it is now possible to see EUR/USD trading at 1.16-1.17, says Beecroft.

"We are fearful that if we carry on in this way of solving debt problems with more debt ... we are going to see quite dramatic consequences, certainly in the next decade, but also in the shorter timeframe so, maybe crisis 2.0 due to a eurozone or an outright dollar crisis."