In an article titled "The real cost of QE" Bank of America's FX strategist Athanasios Vamvakidis takes a critical look at the U.S. Central Bank's particular brand of unconventional monetary policy, and its changing relationship with financial markets.
..."At some point during (the) Fed QE, the markets started reacting positively to bad news. In our view, this is when things started going wrong. Bad news became good news for asset prices, as markets expected more QE by the Fed. "
"Asset prices were increasingly deviating from fundamentals, as the markets were trading the Fed instead of the economic reality. This was clearly not sustainable."
... "We should have known something is wrong. The Fed “taper tantrum” could have been the first signal that QE had gone too far. The second warning may have been the across-the-board emerging markets sell-off that started in mid-2014, as QE tapering was coming to an end and the market started pricing Fed tightening, a sell-off that intensified substantially this year (2015)"
Nah ... ya' really think so ???!!!
After QE 1, I remember an analogy made by some wag in Britain about the dangers of QE who likened it to a guy sitting at a bar on a stool drinking shots of whisky - after the first one you feel pretty good so you reach for another, and then another, and another.
But as you keep imbibing you don't realize how snockered you've really become until you try to stand up away from the bar and then it's that first step off the stool that really knocks you down to your ass!".
Think the effects and damage from the Fed's QE are done ? .... Are you sober yet ?
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