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Easily the best summary post of the effects of QE2 that I have yet read

Recs

5

August 04, 2011 – Comments (3)

Very long post by Cullen Roche, so I won't try to repost it here. But this is an absolute must read.

QUANTITATIVE EASING 3 – ANOTHER MONETARY NON-EVENT? - http://pragcap.com/quantitative-easing-3-another-monetary-non-event

Read it, and if it didn't all make sense, read it again. There is a huge difference between the markets and the economy. And there is a huge difference between vertical money creation (via Government Spending) and horizontal money creation (loans/margin taken out to make speculative bets or to hedge against inflation concerns).

Posts like this one are key to understanding how in a weak demand environment (balance sheet recession), and an environment where everybody seems to mislabel QE as 'money printing' or 'debt monetization' based on basic misunderstandings, how one form of 'inflation' manifests (and to understand the distinctions between forms and the environments where they manifest, read http://caps.fool.com/Blogs/why-deficit-spending-and/621467).

3 Comments – Post Your Own

#1) On August 04, 2011 at 9:20 AM, binve (< 20) wrote:

I made a set of similar observations last week http://caps.fool.com/Blogs/margin-debt-the-stock-market/619644, but nowhere near as comprehensive as the post above

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#2) On August 07, 2011 at 12:24 AM, willmaster01 (< 20) wrote:

So basically the stabilization of the economy and the effects therin are all being considered to be negligable? You can see in those charts where the falling stops.

Then you can see the increase in 'speculation' naturally... It wouldn't be speculation if it didn't come long before concrete data backing stablity and typical growth therafter. Of course its going to look out of place.

I call the non event a good thing! How about we have a1930's recession, then we can call that an 'event'. 

The intent wasn't to create something that could be, but instead to stop something that was nearly a sure thing. Non event = success.  

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#3) On August 07, 2011 at 12:35 AM, binve (< 20) wrote:

willmaster01,

The prevention of a depression was from Government Deficit spending acting counter-cyclically in this balance sheet recession.

It has nothing to do with QE, which was a huge non-event. And in fact encourage a lot of speculation. So it was worse than a non-event..

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