“A Total Illusion from QE and Financial Engineering”

[marmar]

“A Total Illusion from QE and Financial Engineering”
by Harry Dent • April 22, 2016

The 10-Year Treasury Is Less Than You Think


By Harry Dent, Economy & Markets


When the Fed was created in 1914, it was set to task of controlling short-term interest rates in an attempt to iron out financial cycles. It succeeded for many years. But by avoiding the natural rebalancing (and occasional pain) from free markets, we just got a bigger bubble into 1929. Then, when it finally burst, we got the greatest depression in all of modern history!

Since the Fed and other central banks were created, they have always manipulated short-term interest rates to try to encourage borrowing and spending in slowdowns – to make the natural economic cycle “go away.”

And every time, it suppresses the economic cycles that were already in place, until finally they come roaring back.

So it always strikes me as funny to see highly educated, seemingly reasonable people in pin-striped suits and pantsuits stand in front of us and basically say that there’s a free lunch after all – that we can get something for nothing!

To them, economics is no longer a matter of supply and demand, free markets and rebalancing. They think we’ve found a way to program the economy so we never have a recession again.

All the apparent education and sophistication of these top economists, financial officials and central bankers boils down to this simple automaton explanation: if we don’t keep taking more of the financial drug that we used to keep the bubble going, like zero interest rates and QE, we will collapse and go into detox. ..................(more)

http://wolfstreet.com/2016/04/22/a-total-illusion-from-qe-and-financial-engineering/

[Jim Beard]

1. V. Low interest rates can be just as damaging as extreme inflation because

the tools of the Fed are frozen in place. They just do not have any tools to control the economy if the ability to raise and lower interest is not available.

[Nye Bevan]

2. Does the author of that article even know that QE ended in October 2014? (nt)