Understanding Quantitative Easing

Read my “Understanding Quantitative Easing” white paper at SSRN.  

Understanding the basics of QE:

A quick QE parimer.

The mechanics of a QE transaction.

QE is not “money printing”

Quantitative Easing – the greatest monetary non-event.

A visual guide to endogenous money and the failure of QE.

The failure of QE2:

QE3 – Another monetary non-event?

Did QE2 do more harm than good?

QE2 failed to control interest rates because it was about size and not price.

The Fed controls rates via their monopoly control of reserves. The myth of bond vigilantes does not apply to the USA.

Misunderstanding the operational aspects of QE can be bad for your portfolio.

QE doesn’t add “liquidity” to the economy or the markets.

QE does not create more borrowing in the private sector.

Policy Mistakes and Misunderstandings:

QE is not “debt monetization”

QE1 and QE2 did not cause an explosion in the money supply.

How QE1 helped the economy due to the extraordinary circumstances (scroll down).

Milton Friedman misunderstood QE.

Bill Clinton was afraid to pay off the national debt.  

Fed officials misunderstood QE.

There is no such thing as an equity market “wealth effect”.

How QE leads to market disequilibrium

Permanent open market operations can influence psychological channels through a portfolio rebalancing effect leading to temporary market dislocations.

The negative effect of QE2 on commodity prices.

Misunderstanding the effects of QE2 was an enormous economic blunder.

* These articles will be better understood if the reader first understands this research paper on understanding the modern monetary system.

 

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.

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