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The end of an era

Published Thursday, October 30th, 2014

Six years AL (after Lehmanns) and the Federal Reserve’s QE programme is finally terminated. After increasing its balance sheet by $3.7 trillion in three QE injections the Fed has decided that the patient can survive without the drugs. It put a brave face on the decision yesterday expressing optimism that the job was done and that “a range of labour market indicators suggests that underutilisation of labour resources is gradually diminishing”.

QE 3 has seen unemployment fall from 8.1% to 5.9%, an impressive reduction. The whole programme has raised asset prices, killed off real wage growth and annihilated savers. It has not done what most economists feared which was to fuel inflation and this remains a mystery to be solved. How come all of this money printing by the Fed, Bank of England and Bank of Japan has not sent prices spiralling higher?

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Posted by David Hufton