Mr ‘balance sheet recession’ himself holds forth on the follies of QE. Highly recommended reading…
As I spoke with investors in London and Geneva last week, markets were rocked by a resurgence of fiscal problems in Greece and a steep drop in the price of silver andother commodities.In London there was talk in the market that the drop in commodity prices had left a handful of investors facing serious losses. If true, it suggests that the preceding rise in commodity prices was driven by speculation and not by real demand.Another frequent topic of discussion was QE2, indicating that many investors established large positions based on the availability of substantial amounts of liquidity under this program.All these factors suggest that a number of markets have been transformed into liquidity-driven markets, and that asset prices in those markets may have risen to levelsthat cannot be justified by the real economy.
