Probably the biggest ever transfer of wealth to the wealthy happened in this last decade+. The ones in charge were so keen that they wouldn't even consider alternative solutions. They had to do the bidding of their masters… obviously!
The winners were the big asset owners and gamblers in the casino stock-markets.
Payback time for QE looms — and it will be expensive[1]
Bank of England warns that reversing monetary policy will have consequences
September 2011 quarterly report from the Bank of England that predicted that while quantitative easing would work on the economy in various ways, the one to which it attached "particular importance" was the "portfolio balance channel". This was code for "bubble creation channel" or more simply, a very sharp rise in asset prices.
"When the central bank purchases assets, the money holdings of the sellers are increased… Unless money is a perfect substitute for the assets sold, the sellers may attempt to rebalance their portfolios by buying other assets that are better substitutes. This shifts the excess money balances to the sellers of those assets who may, in turn, attempt to rebalance their portfolios by buying further assets — and so on."
So now after all the banksters sold off their bad eggs and bought better ones, who ends up with all the rotten eggs? Your guess is as good as mine about who now owns all the toxic bad assets!
The US Fed has also made no secret of the fact that one of the main points of QE was to shove up bond, house and stock prices and make everyone feel better.
In a paper out a few weeks ago (staff working paper #720) bank analysts suggested that without QE, house prices in the UK would have been 22% lower by 2014 than they actually were. Equity prices would have been 25% lower.
in the US, QE is now fast turning to quantitative tightening (QT). Set to accelerate throughout 2018, it is something that should be seen as the "overriding" dynamic for markets and the reason why the bull market in the US really is on the way out.
This might be making you nervous and it probably should be… now doesn’t feel like the best time to pour new money into markets. However, it also isn't time to cash out.
QT could trigger a scramble to sell off the toxic bad assets now publicly owned. The last ones may be left holding the can!
[1] Payback time for QE looms — and it will be expensive
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