The unfairness of QE

The QE programme of the European Central Bank has lasted for several years and the chairman of the ECB says he is considering reversing the asset purchase programme. Once the ECB reverses the QE programme, it may mean that the gaps between different countries' economic performances are widened.

It finds that the investment spending in most of the EU member countries has not recovered to pre-crisis levels that Germany and Austria were the only two eurozone countries to have increased their investment spending above the pre-crisis levels. The QE programme in each relevant country is proportional to its economic size that the larger economies have more assets to be purchased by the ECB while the smaller economies have fewer assets to be purchased by the ECB. This may result the current situation that the strong economies remain strong and the weak economies remain weak.

If the ECB decides to reverse the QE programme, it may result in the widening gap between the strong economies and small economies. Though more assets of the large economies will be sold when reversing the QE, the market has more confidence about the large economies and is willing to purchase their assets; because the market has little fate in the small economies, the market is unwilling to purchase the assets of the small economies. This means the asset prices in small economies may decrease more comparing with the asset prices in large economies when the ECB decides to reverse the QE programme. This will lead to the gap between the large economies and the small economies.

Therefore, to narrow the gap, I think that the ECB should only reverse the QE program in the large economies, such as Germany.