Recently, European Central Bank (ECB) policymaker Jens Weidmann said the strategy of printing money was not the solution to the eurozone crisis. (Source: Carrel, P., "Printing money not the way out of crisis: ECB's Weidmann," Yahoo! Finance, November 20, 2013.) Ya, no joke!
Of course, Weidmann was not referring to the Federal Reserve, but to thoughts from within the ECB that perhaps buying assets was another tool to use. He may as well be talking about the Federal Reserve's quantitative easing strategy, though. I'm sure he's been looking at the Federal Reserve's massive money printing and its overall ineffectiveness; he's likely studying the U.S. situation and realizing that the act of simply printing money is not the end-all for achieving success in rebuilding an economy.
There's that old saying that you learn from other people's mistakes—that's what we have here.
The Federal Reserve continues to balk at stopping the money printing. Current Federal Reserve Chairman Ben Bernanke expressed his disappointment in the recent jobs market readings in a recent speech, saying there were insufficient reasons to stop the quantitative easing.
Five years of quantitative easing by the Federal Reserve and, while it clearly helped the country from a much deeper recession and breakdown, the benefits are stalling.
So I say to Weidmann, fight against the use of quantitative easing via printing money in the eurozone, as it will simply cost the eurozone hundreds of billions of euros and would likely do very little for the economy. The already historically record-low interest rates in the eurozone will suffice.
The same thing should be the case on this side of the Atlantic. We already have interest rates at record lows; that should be sufficient to allow consumers and businesses to borrow, spend, and drive the economic renewal.
In other words, the Federal Reserve should begin to rein in its bond buying in December, or at the latest, at the January Federal Open Market Committee (FOMC) meeting. Its impact on the economy is not that significant at this point, so let's begin to taper. Of course, the Federal Reserve will likely reject this idea. Expected to take over as head of the Federal Reserve in January, Janet Yellen is even more dovish than Bernanke—and that is scary.
The ECB is finally out of its second recession since 2008. Things are beginning to look better, but it will take time. Printing money is not the answer.
As an investor, I would begin to look at Europe for some investment opportunities through exchange-traded funds (ETFs) as the region comes out of its recession. You could consider playing small-cap European companies, such as WisdomTree Europe SmallCap Dividend (NYSEArca/DFE), a small-cap rebound play in Europe. These investments should perform well as the economy recovers.
Alternatively, to play the region's two top economies, you could take a look at iShares MSCI Germany Small-Cap (NYSEArca/EWGS) and iShares MSCI United Kingdom Small-Cap (NYSEArca/EWUS).