This plea to the fed to end QE is so stupid it necessitates a response: Peter Boockvar: Dear Federal Reserve
The path ahead will be disruptive but that can no longer be avoided as 6 years of ZIRP and a 5 fold increase in your balance sheet has already way overstayed its welcome. The longer you wait, the worse the consequences will be when you do. Again, happy holidays and happy 2015.
If market participants were really concerned about the fed balance sheet, such concerns would be manifested in the bond market in real-time in the form of rising yields. And with QE over, the left can’t blame the fed on depressing yields. Instead, yields for 10-year treasuries are at historic lows. So the fed has no pressing need whatsoever to unwind the balance sheet.
Thanks to those two sayings, the US economy has become the US ‘boom and bust’ economy.
Wahh wahh cry me a river. Since 2000, the US has had the strongest inflation adjusted growth of most developed countries. That includes Britain, Canada, Germany, an Japan. Boom and busts are a small price to pay for such steady and robust growth. And no one is putting a gun to anyone’s head forcing them to invest in whatever sector is booming. That’s the whole reason people use index funds – to help mitigate the risks of sector-specific boom and bust cycles. Boom cycles bring cool technologies like the modern web browser, the personal computer, Facebook, Uber, etc. And bust cycles prune away the losers.
Cheap money that you created fueled a drilling boom that oversupplied a market that now has shrinking demand. Now with lower oil prices, headline inflation and inflation expectations as a result, you may actually use low inflation as an excuse to keep rates low for longer…
Correlation does not equal causation, pert. As shown below, historically there have been instances of oil prices rising during periods of monetary tightening, such as in the 2000’s. Oil is very volatile and is influenced by many factors, with monetary policy just one of them.
Second, at any given time there will always be at least one sector that is struggling. In 2007-09 it was the financial sector. Between 2000-03 it was tech. Now it’s energy’s turn. A lot of these speculative hydraulic fracturing companies issued tons of junk bonds, and the companies themselves were dependent upon oil staying above a a high threshold in order to be profitable. That just sounds like a recipe for disaster, and the blame falls on company management instead the fed. One could argue that ZIRP cased investors, in search of yield, to flock to these risky asset classes, but even if that is true it’s ultimately the responsibility of the investor to understand that with great yield comes great potential risk. Like the 2008 financial problem, everyone was looking for someone else to blame for losing money – the rich, the fed, Washington, bankers – never themselves. The concept of ‘mal investment’ is ambiguous in that it’t impossible to access if an investment was a waste until a long time has passed.