But, ladies and gentlemen, experience from other countries has shown that high liquidity and low interest rates create an environment which is often conducive to the formation of asset price bubbles. Thus the likelihood grows over time, and the ECB’s purchase of government bonds will only fuel this growth further.
There is no storm raging now but the winds are picking up, and last week the work of banking supervisors became yet more challenging. But as Adam Posen, President of the Peterson Institute, said last week in an interview: “Germany must not take the rest of Europe hostage just to fight a bubble on its own housing market”.