Another Hundred Trillion For The Library

Words have meaning for a reason, to convey precise ideas easily and readily understood by the reader or listener. If you use the term “stimulus”, as its root already suggests you’d expect something to be stimulated by whatever is being classified using this specific grouping of letters/sounds. Context rounds out the meaning.

For the last twenty years, you’d have been wrong to associate the term in the monetary context with its definition. QE was born in March 2001, and from its very first day it has been called “stimulus.” Yet, going back to its genesis, the idea’s creators weren’t really sure it would amount to much. Discussions held in private were very different from those offered to the public.

Stimulus. Money injected into the economy. Accommodation. Easing. Science.

None of those words have ever applied to the program. Two decades later, the actual science is very clear on this point. Even studies conducted by the central banks who have used the tactic, those whose researchers are often palpably desperate to find and sugarcoat any gray area in order to shade it favorably in QE’s direction, these most charitable of reviews can only ever say at best the thing maybe helped lower interest rates a touch more than the market had/has.

Inflation? Economic growth? Recovery? Forget it. Government bond yields drop on liquidity and safety preferences and here comes the central bank to arguably lower already low rates a few bps more. If you’re wondering how this might help, you’ll have to get in line behind all the central bankers standing there already these last twenty years hoping to eventually figure that out.

Since it sounds so ridiculous, so outlandish and the complete opposite of how this stuff is written about – even today – in every single financial media story, you’d think I’m making this all up. I only wish I was (and this is but a small sample spanning QE’s entire history):

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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