Re:Paul Krugman: The austerity delusion
by linkregister on Wednesday April 29, 2015 @04:54PM
(#9461699)
Our last (and according to Yellen, et. al., our final)[1] QE was in October 2014. Is there a reason why you continue to talk about QE in the United States in the present tense?
QE is happening globally. As you noted, QE3 ended in the US Oct-14. On the final day of US QE3 ending, the Bank of Japan announced another round of QE in their economy.
http://www.reuters.com/article/2014/10/31/us-japan-economy-b...
The European Central Bank announced QE in Jan-15.
One way to think of QE is global competitive devaluation to capture global demand. QE + ZIRP or even negative interests are the primary tool of central banks now. Capital misallocation continues on a global scale.
Re:Paul Krugman: The austerity delusion
by walterbell on Wednesday April 29, 2015 @05:17PM
(#9461861)
How would negative interest rates compete with cash which has a zero interest rate, or premium real estate which offers a long-term return?
This is a good summary of why people might buy negative interest rate bonds:
http://www.vox.com/2015/2/5/7981461/negative-interest-rates-...
e.g. Cash is not secure in your bank account. A government backed bond, even at negative interest, may be more secure than a cash balance.
ZIRP and negative interest rates are pushing people out on the risk curve and raising asset prices.
As I said in an earlier comment, IMHO, all investment decisions are bets on central banks.
Krugman is fighting an old war.
Our current economy is not encumbered by too little demand - but by too much supply from past capital misallocation.
Our addiction to QE has made problem far worse. Asset markets are exploding in price higher due to central bank intervention while incomes are not.