This is where I get left behind.
For me, measuring things that exist is hard enough and pinning down could-have/should-have/would-have is just more trouble than it's worth. Let's all enjoy our own private cherished opinions knowing that no proof exists for or against.
If you don’t think QE is bolstering the market, can we then agree that it should be terminated post haste?
For me, measuring things that exist is hard enough and pinning down could-have/should-have/would-have is just more trouble than it's worth. Let's all enjoy our own private cherished opinions knowing that no proof exists for or against.
I've been thinking about that reply for awhile, and I think you owe it to yourself to think harder. It isn't a difficult connect to make, just supply and demand.
1. The Fed has increased demand by increasing the money supply. If you disagree, where is the $85 billion a month going?
2. Increased demand leads to higher prices. I presume you will accept that premise without further argument.
3. Increased prices caused by increased demand are not linear, as many other variables come into play.
Real world example: Ethanol subsidies. The demand and price for corn per bushel is much higher now than it was before Ethanol subsidies due precisely to the extra demand created by those subsidies. No one questions this. But if you look at the price of corn since the beginning of subsidies, you'll find that it still goes up and down, just as it did before, but at a higher level. If congress announced tomorrow that all ethanol subsidies were to be halted immediately, the corn market would collapse.
QE is to the greater market just what ethanol subsidies are to the corn market. This is not a mysterious, incalculable effect. Subtract $2 trillion of buys out of the market and what does it look like?
The Fed has laundered Main Streets wealth via QE into the hands of Wall Street, and we're supposed to be happy about that.