Robert Waldmann: Noted for May 30, 2013:
"QE" = red flag. Robert Waldmann = bull.
I like the quoted post by Morski, but I'm not convinced it has anything to do with QE. Loose conventional monetary policy means low interest rates and potentiala FoBOR. I's say he is noting the effect of expansionary conventional monetary policy.
QE could be relevant due to a portfolio balance effect with low long rates and the Fed is buying long term treasuries. There is, to put it mildly, extremely limited evidence of this from event studies (not statistically significant, even with... uh... considerable effort to make them so).
QE can also be a signal that the federal funds rate will remain low, even when unemployment is normal. Again, this should show up as announcement effects on medium term rates which are not there. Also how relevant is it really ? Sad to say, normal unemployment is so far off and investors are short sighted enough that I doubt such signalling would affect asset prices much even if the Bernanke FOMC could precommit the actions of another FOMC.
I agree with Morski's conclusion that QE is better than nothing, which is the politically possible alternative. But I am pretty sure that the alleged effect of QE which he describes would have occurred if the FOMC rule were to set the federal funds rate to the greater of 0.15% and the Taylor rule level--that is the most conventional monetary policy imaginable.