Must-Read: Barry Ritholtz: The QE Era

Must-Read: Here we have a fairly powerful visual argument that:

  1. American financial markets did not expect QE to do much.
  2. Nevertheless, QE had substantial effects: whenever the Federal Reserve went on a long-bond buying spree, those who had sold the bonds took a nontrivial share of their cash and piled into stocks.
  3. That is the way it is supposed to work for QE to be effective.

Barry Ritholtz: The QE Era:

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But did the piling into stocks and the resulting rise in stock prices induce anyone to go short equities and purchase currently-produced goods and services on any significant scale? The theory of Tobin’s Q says that it must have. But is the theory of Tobin’s Q true?

May 6, 2015

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