The Good, Bad and Ugly

by Axel G. Merk, Merk Investments
Gold Seek

Are we better off with “QE”, the ultra-accommodative monetary policy pursued by major central banks around the world? Is it “mission accomplished” or are we facing a “ticking time bomb”? Are extreme characterizations even warranted to describe the unconventional monetary policy of recent years, and what are implications for investors?

[…] The Good

When interest rates are at or near zero and central bankers want to provide more “monetary accommodation,” it is not clear that negative interest rates are the answer. The term “quantitative easing” or “QE” was coined to describe the purchases by of government bonds by central banks. It was combined with “forward guidance” which signaled rates would stay low for an extended period; in our assessment the key goal of both policies was to lower long-term rates (historically, central banks control short-term rates, but leave longer term rates up to the market to determine). Doing so, so the logic goes, would provide the desired “accommodation.” There is an index that tries to create a Fed Funds rate incorporating QE:

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