MICROBLOGGING: Gillian Tett, Carmen Reinhart, Peter Schiff, & Brad DeLong on IAI.TV Talking About: QE in Retrospect
Guess at a true term premium of 10 basis points per year of duration…
Then $1.4 trillion of quantitative easing in assets, averaging seven years of duration, would take risk bearing capacity that is paid $10 billion a year and free it up for deployment in things other than the treasury market. That is $10 billion a year of a valuable, productive resource that can then be devoted to putting people to work and hence hastening recovery and growth. But in a $70 trillion a year world economy, things would have to be very strange indeed, and there would have to be very precise bottlenecks, multipliers, and accelerators to expect such an 0.015% augmentation of private sector productive resources to do much.
It seemed to me beforehand that quantitive easing would have big effects only if it worked not through portfolio balance and resource augmentation channels, but rather, through confidence-building and signaling.
But I did not really understand how doing something new and surprising of extraordinary headline-number magnitude, but with little effect on real resource flows, was thought likely to accomplish much…
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From þe Chat, & of þe Moment… Things worth noting, but much too short to be worth a full post…