2017-09-10 —

``My feeling is that the flow is the critical factor, both for asset prices as discussed here, and for the impact on the economy (see Printing versus Burning blog post).  That is, the current stable balance sheet size is neutral for the US, and attempts to shrink it will be impactful for markets and the economy.  However, that neutrality on a domestic level is overwhelmed by QE expansion still going on elsewhere in the G4.  As the chart shows, G4 central bank flow does not turn negative until Q2-Q3 2018 (note the assumptions), but  I don't expect that the impact on asset prices will be delayed until that date.  The negative domestic flow, set to begin this year, could be more influential than the offsetting positive flow elsewhere.  Until negative flow begins in the US though, I expect more of the same''

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