QE Is Bad Policy, But Not For The Reasons You Think

  • QE is blamed for the recent inflationary surge by hard-money doctrines – the same hard-money doctrines that failed spectacularly in the previous decade.
  • QE didn’t produce any inflation in the 2010s, there is no reason to assume the 2020s will be any different, as QE has very little effect on the real economy.
  • What has changed is pandemic-induced supply dislocations and an effective fiscal policy response.
  • Since both of these can be deemed temporary, it isn’t unreasonable to assume inflation will also be temporary, even if that judgment might ultimately be proven wrong.
  • However, as pandemic disruptions endure, inflation may have reached escape velocity, after which it takes on a dynamic on its own. So the Fed is right in tightening policy.
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