Editor award, 217 comments and counting, this article made some waves..
QE And Inflationary Expectations
September 20, 2012 | 217 comments
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…)
Last week we wrote an article about the ‘hard money’ versus ‘soft money’ debate within the context of central banks like the Fed, the ECB and the BoJ buying assets, and how that might work out. Here is the context:
Normal business cycles can usually be smoothed with monetary policy.
However, the present situation isn’t a normal recession where lower interest rates will do the trick, but instead is a ‘balance sheet’ recession, brought about by households and banks cutting borrowing and spending; paying off debts in order to repair balance sheets.
Also, interest rates cannot be lowered any more by the Fed; they’re effectively zero. Fiscal policy (the obvious candidate to revive the economy) isn’t available because of political deadlock. [Read on here]