QE2 Is Not A Recovery Plan, It's A Stealthy Scheme To Prepare For The Next Bank Bailout
I’ve shown in rather elaborate detail in recent weeks that quantitative easing does not help the real economy generate a sustained recovery. This can be summed up as follows:
* QE did not reduce interest rates in Japan and was ultimately deemed a failure by the Bank of Japan:
“QE’s effect on raising aggregate demand and prices was often limited” (Ugai, 2006)
* QE has been shown to have had little to no impact in the U.K. (also see here).
* While QE worked to ease the strains in the credit markets in 2008 and also improved bank balance sheets there was no change in interest rates during the entirety of the program in the USA and borrowing has remained very weak.
* Because the US has a demand side problem and not a supply side problem QE is unlikely to result in higher aggregate demand and revenues (see here).
* QE is likely to negatively impact corporate margins as investors falsely interpret QE as “money printing” and seek the safety of hard assets (see here).
* The “wealth effect” of QE is likely to fail. Attempts to keep asset prices “higher than they otherwise would be” will always fail (see here).
* Since QE has been shown to have no discernible long-term impact on interest rates or aggregate demand there is no fundamental reason for stocks to move higher due to the program (see here).
All of my work regarding QE has me wondering why the Fed would implement such a policy when the evidence appears to point to little to no gain in economic growth? The only logical answer is that QE2 is really just another case of the Federal Reserve proving that this is a country centered around the bankers, by the bankers and for the bankers. Before you brush me off as some conspiracy theorist please consider the evidence.
Read more: http://www.businessinsider.com/qe2-is-not-a-recovery-plan-its-a-stealthy-scheme-to-prepare-for-the-next-bank-bailout-2010-11#ixzz144ECF0uW
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