When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Sunday, November 3, 2013

Fed Is Stuck In a QE Trap

Don't look now, but Ben Bernanke is getting out at the right time, as we now know that Quantitative Easing Policy (QE ) HARMS the Economy In the Long-Run --

Architect of Japanese Quantitative Easing Policy Says QE HARMS the Economy In the Long-Run … and that the Fed Is Stuck In a QE Trap | Washington's Blog: "Many top economists have said that quantitative easing doesn’t help the economy . . . One of the main architects of Japan’s QE program – Richard Koo – Chief Economist at the Nomura Research Institute – explains that QE helps in the short-run … but hurts the economy in the long run (via Business Insider):
"Initially, long-term interest rates fall much more than they would in a country without such a policy, which means the subsequent economic recovery comes sooner (t1). But as the economy picks up, long-term rates rise sharply as local bond market participants fear the central bank will have to mop up all the excess reserves by unloading its holdings of long-term bonds.". . ." (read more at link above)
See also: The downsides of quantitative easing, Cardiff Garcia smackdown watch | FT Alphaville


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