Esther George, Kansas City Fed President, is a hawk among doves. Here’s why she’s concerned about what’s ahead for the economy, thanks to QE. Read more...
quantitative easing and the US economy
- Esther George on Why It's Time to Begin Adjusting QE
- Your Best Strategy for Playing This QE Rally
- Why We Won't See the End of QE for a Very Long Time
Even as stocks and bonds continue to digest the concept of rising rates and the end of quantitative easing, there are still some great opportunities to land some big gains before any real trouble hits the markets.
QE may be fading away but that doesn't mean you can't profit...
The more than $2.5 trillion that the Fed's bond-buying program - known as quantitative easing, or QE - has pumped into the financial system is credited with fueling the current bull market.
But while you can't blame investors for getting nervous at the thought of the end of QE, there's really nothing to worry about.
In fact, the Fed's policy-setting FOMC (Federal Open Market Committee) is now caught up in a trap of its own making - something known as a "liquidity trap." It happens when easy money policies like the Fed's zero interest rates and QE still fail to get people and businesses to spend money.
The trap is that you can't reverse the policy without discouraging spending even further, threatening to push the economy into recession (and spooking the markets, as we saw last week), while continuing it will remain ineffective.
"The biggest fear of the Federal Reserve has been the deflationary pressures that have continued to depress the domestic economy," Street Talk Live radio host Lance Roberts wrote in a recent column. "Despite the trillions of dollars of interventions by the Federal Reserve the only real accomplishment has been keeping the economy from slipping back into an outright recession."