A One Sentence Explanation Of Why European QE Will Come Up Short

Reports on Wednesday put the bond-buying program at €50 billion per month. But will this be enough?

Harvard professor Larry Summers has his doubts.

And in a note to clients ahead of Thursday's big meeting, Kit Juckes at Societe Generale broke down some of the problems facing the ECB, and has a clear, one sentence analogy of why the ECB's program is unlikely to fight its biggest problem: a lack of inflation.

Here's Juckes:

As for the effect on the economy, an improving bank lending survey may suggest that temporarily, the Euro area is already doing a bit better. But it's still in stagnation, CPI inflation has not troughed yet, debt levels remain absurdly high, and the idea that growing a central bank's balance sheet is the same as increasing money supply, is like comparing a light shower to a monsoon.

To get inflation, you need too much money chasing too few goods. But as Juckes lays out, just buying debt, thereby adding to the size of the ECB's balance sheet, is not going to increase the money supply, or the amount of money consumers and corporates have to chase goods.

In just a few hours, we'll have more details from the ECB on its latest program.

And while the success of the program can't be known for some time, the hurdles the ECB needs to overcome are high.