The decay rate in this case is the amount of time required for easing to become ineffective and requiring further action (oversimplified). Between 12/23/1913 and 11/25/2008, we had 34,671 days. Gives some perspective to the decay rate chart below. Now we look to be on target for daily quantitative easing by summer. Just keep rearrainging the deck chair, Captain. I’m sure it’ll all work itself out.
Assuming that Ben Bernanke unveils the transition from ‘sterilized’ Twist to ‘unsterilized’ QE4 today (which if he doesn’t will upset more than a few long-only managers looking to make their year), then the chart below shows the incredible and insatiable demand for money printing (and the central banks’ acquiescence).
Looking at just outright incremental injections of excess reserves (money-printing), since the whole ‘experiment’ began, the Fed and ECB have embarked on more and more frequent attempts to prop up this ‘fundamentally’ sinking ship. Perhaps this is what theHong Kong Monetary Authority warned of? At the current average decay period of around 40% per action, we should see the ECB or Fed enact something new by around February 4th (just as the debt-ceiling comes to a head).
He did make the transition, by the way. Sterilization means that the transactions are conducted so that there is no net increase in the money supply. Yeah, we’re not doing that anymore. God help us.Share