Eugene Fama: QE Doesn’t do Much

Nobel prize winner Eugene Fama has done his homework on QE and seems to understand the basic accounting behind it that so many others misinterpret.  In this CNBC interview, Fama explain to Rick Santelli how the only thing being inflated by QE is the expectation that it has wide ranging impacts on the economy.  He explains that it’s a simple asset swap of a version of long debt for short debt and that there’s really no reason for this to impact the economy all that much.

He then went on to explain how winding down QE won’t likely cause an interest rate death spiral. Santelli, not surprisingly, was utterly shocked by some of this. My respect for Fama went up by about a million fold after watching this interview….

 

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Cullen Roche

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services. He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance and Understanding the Modern Monetary System.

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