In response to the end of the credit cycle, policy makers and central bankers in the high-income countries have exponentially increased their presence in the capital markets. Debt issued by governments has soared and central banks are pursuing unorthodox policies — the aim of which varies from country to country.

The purpose of quantitative easing in the US, especially the latest reiteration, is to accelerate employment growth. The European Central Bank’s Outright Market Transactions is to ensure a proper transmission of its monetary policy to countries that agree to EU/IMF conditionality and have access to the capital markets. Japan’s asset purchase program, through which it buys not only government bonds, but also ETFs, REITS and corporate bonds, is to fight deflation.

Initially, the Swiss National Bank bought foreign bonds as a way to arrest the franc’s appreciation that was fueling deflationary forces in Switzerland. When this failed, it moved to formally cap the franc. The SNB now buys sufficient foreign currencies to defend it. The Bank of England’s gilt purchase program seemed aimed at strengthening the economy, though it is much less concerned about the labor market than is the Federal Reserve.