In the current scenario, there is little benefit to ‘throwing money out of a helicopter’ if no one spends it, dampening hopes of reflation any time soon.
In practice, if consumers and companies find themselves awash with cheap money, they risk becoming locked in a liquidity trap.
In turn, velocity — the speed at which money changes hands in an economy — will be equally slow to recover.
Only in the UK, where velocity has been helped by the sensitivity of house prices to short-term interest rates, can we hold onto hopes that velocity may continue to rise.
With the next wave of cheap money set to continue driving asset prices, the levers of further monetary stimulus may become counterproductive — that is, by supporting asset owners who probably need it least.
As supply and demand stutters across the world, central banks risk becoming locked in a vicious cycle, which may last some time.
The US used QE to pull itself out of the 1930s depression, while Japan has so far been running it for 22 years.
Back then in the US, QE ran unbroken for 14 years, despite double-digit inflation touching 20 per cent in 1947.
This was clearly a different time, and QE was stopped only by the 1951 US Treasury-Federal Reserve Accord.
But, if it is a guide, and with virus effects and protectionism still to clear, we may be little more than halfway through our own era of cheap money.
Neil Williams is senior economic adviser to the international business of Federated Hermes
