An interesting quote above to be sure, and former Chairman Greenspan is absolutely correct. We are still expanding the Fed balance sheet. We are “tapering” but we are still pouring money into the global economic system. We don’t know what will happen exactly when the Fed goes neutral or starts to raise interest rates.
One thing is for sure. Pretty much none of it is finding its way to “Main Street.” Many QE dollars have however found their way into the bank accounts of those who were already rich. Read More
If all the “excess reserves” the Federal Reserve has created over the past 5 years were to move from the banks and into the broader economy there is the very real possibility of significant inflation, perhaps more significant than we have known in the modern era in the United States.
No one really knows outside of the Federal Reserve and probably the European Central Bank. But Peter Schiff has some thoughts on the sudden and vastly increased demand from Brussels. He thinks that the the Fed’s supposed reduction in bond buying (QE) is actually being replaced by an increase in European buying, keeping yields down and so too concern.
Malinvestment is a very important concept to understand. It simply means the allocation of capital in ways which appear to be (and may be) rational in a period of artificially cheap credit, but in ways which in the end prove to be inefficient once the market corrects for artificially low rates. (Created by a central bank.) Malinvestment is a symptom and a driver of economic bubbles.
You know, that is a really good question.
This is what the Fed would prefer you not know.
Attached is an extremely well done article which lays out why it is that today’s political establishment, especially the “progressives” are so afraid of libertarianism.
(Alternatively just keep your head down and keep working hard, which is probably best.)
QE is failing. (It was destined to, as we have said many times.) They may be able to jack the system up again. That is extremely possible. But I think it it is equally possible that an alternative scenario plays out here.
Keep watching Japanese debt.
It is interesting to hear (some) people praise Mr. Bernanke for having “saved” the United States and the world from Great Depression II. This praise is misplaced to say the least.