QE is supposed to be a monetary bazooka that does magical things. Instead, it hasn’t done much good, while creating serious unintended consequences.
We know that QE doesn’t work because bank reserves aren’t lent out, and rising asset prices aren’t due to having more of them. Why then the massive bull market?
While bank reserves have nothing to do with crypto’s meteoric rise, QE actually has played some role in it. Except, it just isn’t what everyone thinks it is.
QE is a popular reason cited for the rise in cryptocurrencies, linking the rise in bank reserves with high crypto prices. How true is the QE-Crypto narrative?
If you were offered an investment that returns -0.70% after two years, would you take it? No! Yet that’s what German 2 year bonds are trading for. Why?
What are the true consequences of QE? More frequent liquidity events, short term rates at 0%, dysfunctional repo, and a more fragile system; that’s what.