Over the holidays we were reviewing previous posts on QE and financial repression. Though posted almost 4 years ago, we thought this is very appropriate and timely to today’s macro climate.
One danger of the lack of price discovery [in the bond market caused by QE] is the potential formation of a positive feed-back loop, where other markets fail to discount these distortions and act accordingly. One prominent economic strategist recently stated, “ We’re in a depression. That is what the bond market is telling us.” Only time will tell, but decision makers would be well advised to at least partially discount the signal coming from the bond market.