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A European Central Bank version of quantitative easing (QE) could look very different from the now-familiar model used by the U.S. Federal Reserve Board, economist Carl Weinberg says. To wit, the ECB's asset purchases might not be in the form of government bonds at all – but rather, gold and currencies.

Mr. Weinberg, chief economist of independent research firm High Frequency Economics, wrote in his weekly global economic note that the ECB – which earlier this month raised the possibility of using QE to step up its fight against disinflation – has a limited ability to use bond purchases as the means to expand its balance sheet and boost money supply.

By law (under the European Union's Maastricht Treaty), the ECB cannot buy bonds directly from governments – and past court rulings suggest that the ECB may not be able to purchase sovereign debt at all, on the logic that purchases are a form of financing the budget deficits of member governments.

The only way the ECB has been able to get around this (when, for example, it has bought troubled bonds of Greece, Spain, Italy, Ireland and Portugal) is by "sterilizing" the bond purchases – offsetting them by offering equal amounts of interest-bearing deposits to banks. Problem is, sterilization keeps the money supply steady – which defeats QE's purpose.

If the ECB attempted to start unsterilized bond purchases in a QE program, it would stir up a legal hornet's nest within the EU, especially in Germany, the euro zone's richest and most powerful member. That's something it almost certainly wouldn't want.

"We believe that the ECB's only options to expand its balance sheet quickly – and with the least legal restraint – are to purchase foreign currency of gold in exchange for reserve deposits," he said. These asset purchases would be perfectly legal for the ECB, and wouldn't require any sterilization.

Buying foreign currencies in exchange for newly created euros, Mr. Weinberg said, "would have the same domestic effect as buying bonds, and no law, constitution or other national constraint restricts it." Currency purchases would have the dual effect of expanding the money supply and putting downward pressure on the euro – both of which would support the ECB's disinflation fight.

Gold purchases would have a similar effect, but Mr. Weinberg sees it as a longer shot for the ECB. Gold is a lot less liquid than currencies, and therefore might cause problems both for satisfying a QE program (Mr. Weinberg estimates that the ECB would conceivably have to buy 10 per cent of the entire global stock of gold to fulfill its QE needs) and for an eventual timely exit and unwinding of the purchases.

The cost of Canada's child-welfare crisis

Canada has a child-welfare problem that could cost the economy $8-billion over the next decade in lost productivity, the Conference Board of Canada says.

A study published by the Conference Board this week noted that the number of children in Canada's foster care system (67,000 as of 2007), relative to its total population, is considerably higher than that of the United States (488,000). And the Canadian total has been rising over the past two decades, while the U.S. number has been shrinking.

The report said the majority of Canadian foster children fail to graduate from high school, and on average they will earn about $326,000 less during their working lives than people who were not raised in foster care. It estimated that the average former foster-care child will also cost Canadian governments $126,000 over the course of a lifetime in social-assistance payments and lost tax revenue.

"If governments were to invest that money in initiatives to help improve the education and mental health of children in care, the long-term social and economic benefits could ultimately outweigh that initial cost," the Conference Board argued.

Linking economic and social progress

Do you believe in the adage "Money can't buy happiness?" Uh, yeah, turns out it can – at least in general. But not everywhere, and not all the time. We kind of knew that intuitively, but the Economist magazine has now given us a handy picture to show it.

The Economist published a chart this week highlighting where various countries stand on the Social Progress Index – designed to gauge non-economic measures of human well-being. Charting scores on the index against per-capita gross domestic product, it found that people in wealthier countries do, indeed, generally enjoy superior social well-being.

However, a high GDP is evidently no guarantee of superior social progress. For example, Kuwait's per-capita GDP is higher than Canada's, but its Social Progress Index score is considerably lower.