On 2 September 1995 the world’s biggest financial newspaper, the Nihon Keizai Shimbun of Japan, led its Saturday edition with a piece by Richard Werner, a young German economist working at an investment bank in Hong Kong. The article addressed what everyone was talking about: the recession. Japan had risen from the devastation of the Second World War at great speed, becoming the second-largest economy in the world, but during the 1980s a huge asset bubble had developed. When it popped, Japan’s economy fell into a severe, protracted slump. In his article, Werner suggested a cure: a new kind of credit creation by the central bank. He called it ryōteki kinyū kanwa, or “quantitative monetary easing”.
In the decades that followed, Werner has watched as different versions of his idea have been applied around the world: in Japan in 2001, then in the US and Europe in 2008, and at a still greater scale in 2020. The total credit created by central banks through quantitative easing, or QE, is now more than $30trn.
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