Jun 222013

We have not seen this movie before. We do not know how it ends.

Unwinding the Fed’s Quantitative Easing (QE) programs and central banks’ near-zero interest policies (N-ZIRP), now in Year 5, were never going to be easy. But these have to be done eventually.

The repression of interest rates has hurt savers and had many other unintended consequences. N-ZIRP among other things aggravates the problem of underfunded pension plans, especially in the public sector, where many retirees are guaranteed defined benefit.

Here’s is Gavin Davies take on what the Fed is trying to do, quoted from the Financial Times June 22:

The exit from quantitative easing was always going to be long and arduous. There is no historical playbook for the central banks to follow. Like a fighter pilot who has experienced combat only in a flight simulator, the real thing might be very different. The central bankers are confident that they have the technical tools to finish the job but, as Mr Bernanke admits, it will be like landing that plane on an aircraft carrier, and possibly in stormy seas.

Keep fingers crossed.



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