Barry Ritholtz wrote an opinion piece on Bloomberg today arguing that it’s hard to criticize the Fed’s QE programs simply because we don’t know what would have happened without them. Since this is not a “controlled” experiment in which we can compare a…
Tag Archive for Qe2
Contributors- Economic and Financial, Must Read, Taken Down
5 years of QE and the distributional effects – Sober Look
by Sober Look • • 0 Comments
As we approach the fifth anniversary of the start of the first quantitative easing program, some are asking the thorny question about the so-called “distributional effects” of these unprecedented programs. Who really benefited since the first QE was launched? There is a great deal of debate on the topic, but here are a couple of facts. Financial asset valuations, particularly in the corporate sector have seen sharp increases. For example the S&P500 index total return (including dividends) has delivered 144% over the 5-year period. Those who had the resources to stay with stock investments were rewarded handsomely.
Source: Ycharts |
But what about those who didn’t have such an opportunity? For example savers, particularly retirees who had to stay in cash? They were hurt severely by record low interest rates (negative real rates – see post). And those who had neither the savings nor significant stock investments, relied on house price appreciation or growth in wages. The housing recovery has certainly been helpful (for those who kept their homes), but according to the S&P Case-Shiller Home Price Index, US housing is up less than 5% over the past five years. Not much of a “wealth effect” for those without stock portfolios. And when it comes to wage growth, the situation isn’t much better. The chart below shows hourly earnings growth of private sector employees.
It therefore shouldn’t be a surprise that the three rounds of quantitative easing over the past five years rewarded those who had the wherewithal to hold substantial equity investments. Everyone else on the other hand – which is the majority – was not as fortunate.
Perhaps the best illustration of these distributional effects is in the chart below. It shows the relative performance of luxury goods shares with wealthier clients vs. retail outfits that target the middle class. The benefits of QE are clearly not felt equally by the two groups.
Source: JPMorgan |
So as we prepare for the Janet Yellen’s ultra-dovish Fed (see story), it’s worth thinking about the past five years and the cost of growing distributional effects in the United States. For now there is plenty more cheap money to help those with large stock portfolios.
JPMorgan: – There are debates about whether a 0% cost of money helps anything except financial asset prices … All we know is that the Fed has a story to tell (“cheap money is good”) and they are sticking to it.
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Contributors- Economic and Financial, Must Read, Taken Down
How did we get here? A "map" of the Fed’s balance sheet’s history – Sober Look
by Sober Look • • 0 Comments
Some in the mass media continue to be confused about the historical trajectory of the Fed’s balance sheet. People have trouble distinguishing between the liquidity facilities provided by the central bank and the various monetary expansion activities. H…
Contributors- Economic and Financial, Must Read, Taken Down
Is QE3 justified? Comparing current conditions with 2010 – Sober Look
by Walter Kurtz • • 0 Comments
As the financial markets widely anticipate an aggressive easing action from the Fed (to be announced on 9/13), it is once again worth making a comparison between the conditions that lead to QE2 in 2010 and the current financial/economic condi…
Contributors- Economic and Financial, Must Read, Taken Down
Monetary expansion, the dollar, and commodity prices
by Walter Kurtz • • 0 Comments
Economists continue to insist that there is no connection between Fed’s monetary expansion and increases in commodity prices, particularly agricultural products globally (discussed here). Here is a typical comment: If it is commonly believed that the…
Charles Hugh Smith
Calling All Crash Test Dummies: Big Crash Ahead
by Charles Hugh Smith • • 0 Comments
If the stock market can never crash again due to the Bernanke Put, then why have all the crash test dummies been ordered up?
I know, I know: the stock market will never go down because Ben Bernanke and the other central bankers won’t let it. …
Charles Hugh Smith, Charts and Trading, Latest Business Headlines
If The Market Rolls Over Here….
by Charles Hugh Smith • • 0 Comments
If this rally runs out of steam, history suggests the next move down could plumb depths not seen in years.
If the market rolls over here, the next bottom might be a lot lower than most players think possible. After all, the “news” is all posi…
Charles Hugh Smith
Between Various Rocks and Various Hard Places
by Charles Hugh Smith • • 0 Comments
The U.S. and European economies are firmly between various rocks and various hard places.
Having stipulated that “Forecasting Is Not Humanity’s Strength,” I will not make any foolish forecasts that will assuredly be proven wrong, but it is undoubt…
Bears Chat, Best of the Forums
Goldman: Wake Up! We Just Got QE3!
by Bears Chat at The Wall Street Examiner • • 0 Comments
Very important point from Goldman’s Dominic Wilson on yesterday’s “Twist” announcement. Essentially he argues that the part of the operation where the Fed is going to sell $400 billion of short-dated bonds is irrelevant. Only the buying part really …
Email Bulletins Archive, Latest Business Headlines, Long Term Outlook, Professional Edition
What Fed Does Now Could Skew Longer Term Cycles
by Lee Adler • • 0 Comments
The following is an excerpt from the Wall Street Examiner Professional Edition Long Term Outlook Update. The link for subscriber access to the full report with 13 pages of charts, analysis and conclusions is below. Follow the money. Find the profits!Liquidity is money. Regardless of where in the world that money originates, eventually it flows…