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Heat Rate
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I like your style and the way you think. That said, I would like to drop in the idea that perhaps people have bought in to the idea of QE way too much. The year is 2012 and the Fed is still engaging in QE 4 years after the fact. What does that tell you? Clearly, the problem is not liquidity. A marginal decline in the mortgage rate isn't going to solve a problem of leverage in household, government and corporate balance sheets. Japan has been dropping Yen notes for 20 years. Go take a look at their equity market. Moreover, has anyone taken a look at mortgages rates lately? They have retraced all of QE3s losses and at the end customer front mortgage yields have been rising. People buy in to the idea that QE will kick start the economy. On what grounds are they making this claim? What are the facts? But of course the pundits will say "well if the Fed did not engage in QE then where would the markets be now?". My answer to that is the economy would be in a robust recovery for the simple reason that markets would have cleared and purged the zombie investments in the system. the reader can refer to Jim Grant's research as it is more grounded in fact than the *experiment* that Fed officials are currently engaged in. Economics 101 - QE doesn't solve or help a debt problem.
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Jeff - what was your performance between 2007 and March of 2009? Stocks climbed a wall of worry then too? Same with 2001 to 2003? At some point reality sets in.
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Oct 4, 2012