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April 29, 2013

Is Quantitative Easing Becoming Quantitative Exhaustion?

This discussion of Fed policy seems like a stacked deck:
Central Banks: Is Quantitative Easing Becoming Quantitative Exhaustion?
Monday, April 29, 2013 3:30 PM - 4:30 PM
  • James McCaughan , CEO, Principal Global Investors
  • Cliff Noreen, President, Babson Capital Management LLC
  • Tad Rivelle, Chief Investment Officer, Fixed Income, TCW
  • Aram Shishmanian, CEO, World Gold Council
  • Kevin Warsh, Distinguished Visiting Fellow, Hoover Institution; Former Member, Federal Reserve Board of Governors
Moderator: David Zervos, Chief Market Strategist, Jefferies LLC
Among the monetary measures central banks have taken to address the lingering impact of the 2008 financial rupture, keeping interest rates artificially low has been a primary aim. The term "financial repression" has become associated with that policy. Such measures were launched in the hope of not only stimulating economic activity but to ease the pressure of servicing onerous public debt. Concern is growing, however, that quantitative easing has distorted markets by interfering with the proper pricing of risk and, by extension, obscuring the true cost of capital. Our panel of experts will explore the possible effects of sustained QE and the quest for financial stability. For instance, are bubbles inflating? Will these effects be similar or will they vary from market to market? What costs will long-tem financial repression impose on the Federal Reserve and other central banks? What tools can be employed as alternatives?
It was stacked. Pretty much unanimous thumbs down on QE. Even the moderator is noting how one-sided the discussion is. It's making things worse! (e.g. QE drives up gas prices and holds back the economy). One panelist is even complaining that interest rates are too low, and no other panelist disagrees. They couldn't find anyone to defend the Fed's current policies? Someone to address all the questionable claims this panel is making? Wow. They are giving the Fed credit for stepping in saving markets when problems first hit financial markets, but seem to think we'd be better off if the Fed had done less. Sorry, but we wouldn't be. The Fed was slow to react and overly cautious at every stage of the crisis. We needed more, not less, and still do.

(Weird, the guy arguing that QE made things worse is now arguing that the recovery has been much stronger than most people are aware, e.g. unemployment not so bad as we hear...).

Anyway, think I've had enough of the Fox News version of a debate (actually, Fox would at least have an ineffective defender to tear apart). Time to move on.

[The video from each session will be posted here several hours after the session ends. I'll add the video to this (and other posts) once it appears.]

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