The Collapsing Decay Rate Of QE Programs

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 ofAt 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.

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One Response to The Collapsing Decay Rate Of QE Programs

  1. pateriot says:

    The big misconception is that WWII (government spending borrowed money) is what brought the US out of The Great Depression and that if we had of kept borrowing and spending at the onset of the depression it never would have happened. The truth is that by 1941 we were well on our way to a full recovery. Although the war effort did employ millions, it certainly was not the cause of the recovery.

    Had the current Fed policy been employed at the onset of the crisis (1929-1931) not only would the country have still been in a depression in 1941, it also would have been so hopelessly in debt that it would not have been able to finance the war effort. World War II would have likely had a VERY different outcome as a result and none of us would be here to debate the issue!