While most Fed pundits are focusing on the Arvind Krishnamurthy paper referenced earlier discussing the Fed’s “optimal exit” options, another paper, one by Robert Hall of the Hoover Institution and Stanford titled “The Routes into and out of the Zero Lower Bound”
may be worth a perusal. The main reason is that while the author admits
QE has been largely a failure for the mainstream economy (“the United
States and most other advanced countries are closing on five years of
flat-out expansionary monetary policy that has failed in all cases to restore normal conditions of employment and output“)
in part due to a collapse in collateral values, and in part due to no
capex spending as we have warned for the past two years, i.e., “the
combination of low investment and low consumption resulted in an
extraordinary decline in output demand.”
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