At this point, Europe is notably more exposed to this adverse dynamic than the US because:
– US has stopped QE, Europe is planning to increase
– Europe is more fragmented with language, trade and travel barriers
– Europe is geographical neighbour to more geopolitical issues
– Europe started QE after the European middle class moderates had already been eroded
Asset QE is borderless. US Asset QE that started soon after the 2007 credit crisis has already eroded middle classes globally.
One possible antidote now is instead applying traditional Helicopter QE; giving every citizen a fixed amount of newly printed money. This would stimulate retail growth (and inflation), but crucially would redistribute wealth back to the majority. It would also be much more local in effect than Asset QE; all things that surely should encourage the respective central banks to consider during this time of festive generosity.