Marching In The Wrong Direction

MARCHING IN THE WRONG DIRECTION
ZIRP and QE have levitated a number of asset classes without generating sustainable, powerful economic and employment growth in the developed world. The asset price appreciation has delighted investors, and even those who are queasy and concerned about the unsoundness of the post-crisis policy landscape have been coaxed into believing that the low volatility and high asset prices actually have predictive power in suggesting positive economic and financial outcomes for the global economy and financial system. After all, the thinking goes, if ZIRP and QE were going to cause serious generalized consumer price inflation, then it certainly would have appeared by now. The very ‘discrediting’ of the ‘serious inflation’ crowd gives most investors comfort that policymakers are correct and the skeptics are just dyspeptics or partisans.
We cannot possibly make the following statement any more clearly or strongly: Policymakers and pundits, with rare and courageous exceptions, are marching (and looking) in precisely the wrong direction. After the 2008 financial crisis, the developed world has barely experienced positive growth despite six years of zero-percent short-term interest rates and multiple bouts of money-printing that have taken a variety of forms and that have been announced with a plethora of rhetoric and obfuscation. At the start of the crisis, there was also a massive amount of government spending, but it was dominated by political payback and an attempt to maintain the kinds of jobs that had made sense only during the distortionary boom. Of course, the government spending had a supportive effect on the economy (as all spending programs do), but as designed it did not and could not create lasting and catalytic effects on growth.
Over the entire post-crisis period, there have been effectively no significant structural improvements in the basic ability of the developed world to grow faster. We have described pro-growth policies at length and in depth, but sadly they are nowhere to be found.

This post was published at Zero Hedge on 11/06/2014.