To even think that QE would cause deflation shows that some economists are simply confused about the economy. They do not understand why inflation is falling. Why try to pin it on QE? QE is simply limited in its ability to inject money into the hands of consumers (labor). QE is for those who own capital. QE will cause inflation in capital income. Deflation around labor income is separate story. Capital income and labor income used to be in the same story, but now they have been disconnected from the excessive power of capital income to set wages and move money globally as they see fit, for example, tax havens offshore.
Wages are low. Import prices are falling. Just think that China in the last year invested $4 trillion into fixed capital while the US and Europe each just invested $3 trillion. China is increasing supply into the world and keeping prices low and lower.
QE is not reaching the people, neither as investment nor as purchasing power. Trickle-down has transformed into vacuuming up the liquidity of labor. QE does not cause deflation. There are causes from supply and demand in many markets.
- Low liquidity of consumers in from the labor and credit markets.
- Low import prices on oil and consumer goods from the international trade market.
- Monopoly power to lower prices in the goods market.
The specter of deflation is a signal that labor has no power, no purchasing power, and that they are concerned about their future. The best answer is to start raising wages across the board.