I was having an exchange with a bunch of market watchers about Stephen Roach's comments to Tom Keene on QE. I agree with Roach that as QE represents ‘what got us into the mess’ it is unlikely to be the magic elixir to get us out. Printing money is not the road to prosperity; it can only ever be a temporary liquidity provision until either more income and cash flow are found or until debt is written down to sustainable levels.
Here are some thoughts on what may eventually be the ultimate QE i.e. when the Fed starts buying non-Treasury/MBS financial assets and actual real assets. I will underline the most important points.
Zero is toxic
First of all, low rates subsidize debt accumulation which creates systemic risk and leads to financial crises. This is how all financial crises happ...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.