The markets are panicking about the possible end of QE. Everything but the dollar is down—and down hard—which is no surprise, considering how addicted to Quantitative Easing the markets have become.
The whole point of QE is to keep interest rates down across the yield curve. If exiting QE drives those interest rates up—which is what we got a taste of, with this “taper tantrum”—then the Fed will reconsider, the word “reconsider” here being used as a very polite euphemism for “180 degree reversal”.
Remember, Bernanke and the Fed are convinced that higher interest rates will kill any sustained recovery. Nothing will shake them from that idée fixe. Therefore they will do anything to prevent high interest rates—including walking back this talk of ending QE, and upping the dosage as need be to achieve their goal of sustained, consistent zero-percent interest.
Read the complete article at Gonzalo Lira Blog here.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.