In 2014 alone, $ billion was spent in share buyback, bringing the cumulative amount to $ billion since 2009. As we all know, share buyback may buoy share prices and boost earnings per-share in the short run, but will not improve a company’s productivity and competitiveness, nor create any new jobs. 13. Thirdly, with the US financial system awash with liquidity from QE and with feeble domestic demand, excess liquidity soon found its way to emerging market economies (EMEs), such as China, Brazil and Russia, in pursuit of higher returns. Between the outbreak  2  BIS central bankers’ speeches  of the global financial crisis and the peak in 2014, total inflows to EMEs were estimated to be some $ trillion, with roughly $ trillion of it destined for Asia. In the face of the massive inflows, EMEs experienced currency appreciation, an increase in money supply, an expansion of the credit bubble, overheating in the economy and asset markets, etc. 14. Fourthly, the tide will eventually turn. Currently, with a strong US dollar and the imminent normalisation of US interest rates, EMEs are confronted with capital outflows, currency depreciation, and sharp falls in energy and commodity prices. Their economies and asset markets are coming under varying degrees of downward pressure, which will adversely affect the US and other advanced economies. EMEs have grown much larger in the past decade or two. In particular, China’s GDP ballooned from $ trillion in 2000 to $ trillion in 2014.
First, and foremost, zero interest rates and QE have inflicted big losses on the savers and individuals, funds and institutions reliant on interest incomes. Deposit rates in the US have dropped by 3 percentage points from an average of about 3.5% in 2007. As interest incomes approach the zero mark, many depositors, especially low- and medium-income households and retirees have had to cut their spending. And, while it can be said that “a saver’s loss is a borrower’s gain”, this has not been the case for every borrower. For example, because of negative equity or bad credit scores, many US families are stuck with hefty mortgage rates. In Hong Kong, deposit rates have also dropped by about 2 percentage points since 2007. With total deposits of about $ trillion currently in our banking system, you may wish to think about the potential loss to savers. 12. Secondly, most US families are still in the process of de-leveraging after the global financial crisis and as a result, growth in consumer demand remains lukewarm. On the corporate front, notwithstanding low borrowing costs, many US companies have been reluctant to invest domestically in expanding capacity and enhancing productivity. In fact, annual growth in business investments in the US has averaged only 3.7% since 2009, well below the average of 5.8% in the past economic expansion cycles. At the same time, many US corporations have spent their cash pile to buy back their own shares.