Wednesday, September 26, 2012

I got the QE blues

Ramesh Ponnuru tells us to stop worrying and love QE3. But Ramesh is not giving you the straight poop!

Ramesh: "Long-term interest rates rose after its announcement".

Me: sure for one day, then they started falling right back again.

Look for yourselves:

Ramesh:  "The (stock) market reaction is a sign that this time loosening was warranted".

Me: Yes, stock prices jumped up that day. But look at the trend in stock prices over the last four years

Since early 09, the stock market has been trending up. It's very close to pre-crash levels in nominal terms. QE announcement effects are a drop in the proverbial bucket and certainly don't prove anything about whether or not QE is going to help the real economy.

Ramesh: "Looser money is boosting stocks because it is raising expectations of economic growth and thus of future profits."

Me: Any evidence or proof to back up that assertion? I see no way for him to show this cause and effect.

Do read the whole article. It's really quite bad.


The always relevant Soberlook has more information here.

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