Quantitative Easing

In a presentation at the India Investment Conference in Mumbai, the economist and strategist explained the real meaning of QE and its impact on the economy and financial markets.

When it comes to the dismal science, what happened this past year was not just a random series of events to commit to memory. It was a complex sequence of cause and effect, even when — in the immortal words of Frédéric Bastiat — the effects are unseen.

Governments traditionally have two policy levers to influence the economy: monetary policy and fiscal policy. Many investors have directed their ire at the unprecedented monetary easing of global central bankers over the last several years, but fiscal policy in both Europe and the United States has proven impotent because of unswerving gridlock. Now there is a potential reckoning for fiscal impotency in the form of a fixed debt ceiling in the United States.

All eyes will be on Federal Reserve Chairman Ben Bernanke at the upcoming Fed meetings September 17 and 18. Since the Fed first indicated interest in "tapering" off bond purchases in May, the US Treasury yield curve has shifted upward by more than 100 bps — increasing mortgage rates by a commensurate amount.

While it is true that the government interventions of the past few years indeed avoided a massive debt deflation cycle, it is also true the these interventions themselves are changing the fundamental structure of the economy, as well as the expectations of its participants.

Interest rates in the US have started to rise over the past month, surprising many in the investment world. We asked readers earlier this week: Have interest rates in the US finally started their upward climb toward normalcy? For many of the 918 respondents (approximately 42%), the answer is "Yes, recent increases are in response to important changes in the interest-rate landscape."

The quantitative easing recently announced by the Bank of Japan may benefit investors who hold Japanese equities, but Ron Rimkus, CFA, sees the classic makings of one big investment bubble.

David Kelly, CFA, chief global strategist at J.P. Morgan Funds, outlines three problems with the current Federal Reserve policy of zero interest rates and quantitative easing.

President Richard Nixon's decision to untether the US dollar from gold has left a harsh and lasting legacy for economies all around the globe.

In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked professional investors whether the Bank of Japan can overcome persistent deflation by engineering mild inflation.