By now, everyone is familiar with the mantra that QE is [arghh!] money-printing and that a major unintended consequence could be a chronic and uncontrollable inflation. (One could call this the goldbug, Austrian, Republican case).
Less well known, perhaps, is the theory that QE could be just as unexpectedly deflationary — because long-term micro yields come to threaten a number of financial sectors outright, as well as general expectations of risk-free returns which lead to capital destructive feedback loops....
Case in hand, the latest Federal Reserve Bank of Dallas working paper from William (Bill) White entitled “Ultra Easy Monetary Policy and the Law of Unintended Consequences“.The Financial Times | FT Alphaville
The unintended consequences of QE: not what you think
Posted by Izabella Kaminska