The Fed’s Confession: We Can Avoid A Crash At The End Of QE If Everybody Believes That Everybody Believes In A Mirage....
What an army of rabble-rousers, economists (those banished from the mainstream media), and bloggers, including your humble servant, have been hammering on for years, a study by the San Francisco Fed now finally confessed: Quantitative Easing didn’t do a heck of a lot of good for the real economy.
Whatever it did for Wall Street, and however it shifted wealth to the upper echelon of society, and however it destroyed what little remained of the free markets, and whatever distortions, misallocations, and bubbles it created, QE had “at best,” – emphasis mine – “moderate effects on economic growth,” the study said.
It estimated that the effects of QE on GDP growth were “smaller and more uncertain than a conventional policy move of temporarily reducing the federal funds rate by 0.25 percentage point.” So almost nothing, despite the Fed’s nearly $3-trillion money-printing and bond-buying binge.
The crux of the Fed’s confession: if anything has impact, it isn’t the actual money, but words. “Our analysis suggests that communication” – emphasis mine – “about when the Fed will begin to raise the federal funds rate from its near-zero level will be more important than signals about the precise timing of the end of QE3.”