At first we were in a
liquidity trap as Paul Krugman so eloquently and repeatedly explained, but now the unintended consequence of Federal Reserve Quantitative Easing (to get us out of the "liquidity trap") has put us in perpetual slow-growth as the Fed cannot stop QE without fear of another recession --
"As soon as the economy picks up a bit, the authorities begin to talk about tapering, which sends long-term rates sharply higher and nips the recovery and inflation in the bud, effectively preventing them from winding down the policy. In this kind of world the economy never fully recovers because businesses and households live in constant fear of a sharp rise in long-term rates."(source infra)
Fed Faces Cost Of Quantitative Easing - Business Insider:
". . .Had the Fed not implemented QE, long-term rates would not have risen so early in the rebound, and the economic recovery would have proceeded smoothly. Now, any talk of ending QE pushes long-term rates higher and throws cold water on the economy, making it more difficult to discontinue the policy. That raises the possibility that by buying longer-term securities the central banks of the US, the UK and Japan have placed themselves in a QE “trap” of their own making and will be unable to escape for many years to come. I have previously described QE as a policy that is easy to begin and hard—even scary— to end. The recent drama over tapering signals the start of the less-pleasant second part. . . ."
Proof of this is the recent snafu over
tapering --
It's Time For A Nonhuman Fed Chairman - Business Insider: ""Why bother with transparency when you can and do change your minds?" asked ED&F Man Capital managing director and bond market veteran Tom di Galoma, saying what it seemed like everyone was thinking following last week's FOMC decision."
And I wonder if anyone in the White House or Congress understands any of this?
