Here Rex Nutting argues that the Fed will not taper QE any time soon because their targets are further away now than when QE3 began.
He argues that bond yields are not normal and are reflective of a struggling economy.
“A normal economy would mean normal bond yields of around 4% to 5% for the benchmark 10-year Treasury, instead of the current 2.2%, or last month’s 1.7%.”
He seems to think the market can simply decide when higher rates are in order but that its current expectation of rising rates is somehow wrong. But what is QE? Bond buying is what it is. What does bond buying do? It drops rates. What does a lack of buying do? It raises rates. Simple supply and demand.
“But the market’s expectations for much higher rates ignore just how far the economy is away from normal. In fact, right now the Fed is even further away from its dual goals of full employment and stable inflation than it was last September when it announced the QE3 bond buying program.”
And just maybe Rex, the Fed is smart enough to know that pure bond buying is not the ultimate answer to getting the inflation to take. I mean, do you see the lunacy of your statement when juxtaposed against the premise of the entire article and indeed the point you are trying to make?
QE is obviously not working, so the Fed has to keep on promoting QE.
Ah, WTF? Just maybe the game is in transition and the next phase will feature that free money that the banks have ingested being marked up (by higher long term interest rates) and finally sent out into the economy. At least that makes some sort of sense. ‘Keep doing what you are doing because it isn’t working’ makes no sense whatsoever.