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An Economy Addicted to Morphine

As the economy struggles to recover from the effects of the COVID-19 pandemic, many are calling for the implementation of Keynesian policies, such as quantitative easing, to stimulate growth. However, these policies can be compared to the use of morphine - a powerful pain reliever that can also be highly addictive.

We had a cancer patient in 2001 with a small tumor, and he refused to go under surgery. And as a doctor, rather than insisting on it, we supported his idea not to get surgery and gave him more and more morphine to ease his pain. Years of QE, and now we have a more extensive tumor (malinvestments) in the economy. At the same time, we have basically a crackhead. Either we will support his lifestyle and provide more morphine to let him die overdose (excessive inflation), or we need to make him go under surgery to take that giant tumor.

The US economy is, already, like a patient hooked on morphine. Just as the drug numbs pain and provides a temporary sense of euphoria, quantitative easing (QE) has allowed the economy to avoid dealing with its underlying problems and has provided a false sense of recovery.

In the past, the Federal Reserve has relied heavily on quantitative easing, also known as "printing money," to stimulate the economy. This practice involves the creation of new money to purchase assets, such as government bonds, in order to inject liquidity into the market. While this can be effective in the short term, it can also lead to excessive inflation (which is now proven by the super-hot inflation levels we encountered in 2021 and 2022) and an over-reliance on these measures.

Some “economists” have even suggested that the current economic situation calls for a shift toward Modern Monetary Theory (MMT), which advocates for the use of government spending to stimulate growth. However, this approach is even more problematic, as it would essentially mean the government is able to create unlimited amounts of money to fund its spending. This could lead to hyperinflation and a complete loss of confidence in the value of the dollar.

We could see how bad the results of this approach came out just by checking out the economic situation of Turkey (a.k.a. Turkiye). Super-high inflation, a decreasing GDP per capita since 2013, skyrocketed unemployment while having a low labor participation rate (the exact opposite of the “beloved” Phillips Curve), and a Lira that is now regarded as an “alt-coin” because of the volatility and the loss of confidence.

Also, there are some other economists offering one other possible alternative is the use of NGDP targeting, which focuses on maintaining a stable level of the nominal gross domestic product rather than trying to control inflation. This approach has been suggested as a way to avoid the pitfalls of both Keynesian and MMT policies. However, given the current high levels of inflation, implementing NGDP targeting may not be feasible at this time.

Quantitative Easing and Its Effects on The Economy

On the surface, QE appears to be a harmless and even necessary measure to support the economy during times of crisis.

However, like a morphine addiction, QE can have serious side effects. Quantitative Easing can provide a false sense of security and mask the underlying problems that need to be addressed. Keeping interest rates artificially low discourages savings and encourages excessive borrowing. It can also lead to asset bubbles, inequality, and inflated stock prices.

The most significant concern should be the asset bubbles, as the increased money supply can lead to inflated prices for stocks and other assets. This can create an illusion of prosperity, but it also leaves the economy vulnerable to sudden downturns when the bubbles inevitably burst —as explained by the Austrian Business Cycle Theory.

Furthermore, QE cannot be used indefinitely. Eventually, the economy will have to face reality and deal with its underlying issues. When the Federal Reserve eventually stops buying securities and raising the money supply, interest rates will rise, and the economy could suffer from withdrawal symptoms.

In recent years, the global economy has become increasingly reliant on quantitative easing, or QE. Like morphine, QE provided quick and effective relief from the pain of economic downturns, however, it pumped up the asset prices and the inflation. As you can see from the graphs, the level of QE we encountered during the COVID period is unprecedented.

The other effects of the Quantitative Easing

Additionally, QE can lead to moral hazard, as it can encourage risky behavior by banks and other financial institutions by sending out wrong signals to the market. With the knowledge that the central bank will step in to bail them out if necessary, these institutions may be less cautious in their lending and investing practices, leading to further instability in the long run. This actually was one of the reasons for the 2008 Financial Crisis.

Similarly, QE can have negative consequences for savers and investors, as it can lead to lower interest rates and reduced returns on their investments. This can be particularly detrimental for those who rely on their savings for retirement or other long-term goals.


Overall, as can be seen in the article, while QE may provide temporary relief from economic pain, it is not a sustainable solution and can ultimately do more harm than good. The global economy must find a way to wean itself off of this addictive substance and address the underlying issues that have made it so reliant on QE in the first place.

Ultimately, the economy is now like a patient addicted to morphine - we have relied on quantitative easing for too long, and now we are facing the consequences. In order to avoid a complete collapse, we must be willing to undergo the necessary surgery, even if it is painful in the short term. Otherwise, we risk a future of excessive inflation and economic instability.

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