My recent exchange with @LISwires on the issue of risks involved in both continued QE and pursuing an exit strategy.
The tweet the started it: "Both are… RT @LISwires: QE is "Treacherous" RT @livesquawk: Roubini: Fed Exit Strategy Will Be 'Treacherous' fw.to/gWL3DCg @CNBC"
Explaining my view that QE & Exit strategies are both consistent with structural and grave risks are:
[Both QE and exit is] like being between a rock and a hard place... inside an iron pipe… Exit = QE = non-QE = stimulus = austerity = disaster. The whole point of a structural depression is EXACTLY that!
In a normal recession, one half of the economy's 'cart' gets stuck in the 'mud'. In a structural depression, the entire cart is in the middle of a quick sand trap.
The ONLY thing that would've worked was direct injection of funds to write down household & corporate debts, & in some cases - restructure sovereign debt too. We missed the boat on this by engaging in LTROs/OMT/ESM/EFSF/ESF/EBU/EMU… stupidity of tinkering along the edges. Hence [having engaged in wasting resources on marginal solutions], from here on - it is vast pain over long term. The choice was made by our 'leaders' in ECB/EU/IMF/National Governments/NCBs.
The real failure of economists/economics is NOT our inability to forecast disasters. It is in our inability to see the size & nature of disaster AFTER it hits.
Note: my reference to the direct recapitalisation solution can be traced to this: http://trueeconomics.blogspot.ie/2010/05/economics-16052010-eu-on-brink.html
The tweet the started it: "Both are… RT @LISwires: QE is "Treacherous" RT @livesquawk: Roubini: Fed Exit Strategy Will Be 'Treacherous' fw.to/gWL3DCg @CNBC"
Explaining my view that QE & Exit strategies are both consistent with structural and grave risks are:
[Both QE and exit is] like being between a rock and a hard place... inside an iron pipe… Exit = QE = non-QE = stimulus = austerity = disaster. The whole point of a structural depression is EXACTLY that!
In a normal recession, one half of the economy's 'cart' gets stuck in the 'mud'. In a structural depression, the entire cart is in the middle of a quick sand trap.
The ONLY thing that would've worked was direct injection of funds to write down household & corporate debts, & in some cases - restructure sovereign debt too. We missed the boat on this by engaging in LTROs/OMT/ESM/EFSF/ESF/EBU/EMU… stupidity of tinkering along the edges. Hence [having engaged in wasting resources on marginal solutions], from here on - it is vast pain over long term. The choice was made by our 'leaders' in ECB/EU/IMF/National Governments/NCBs.
The real failure of economists/economics is NOT our inability to forecast disasters. It is in our inability to see the size & nature of disaster AFTER it hits.
Note: my reference to the direct recapitalisation solution can be traced to this: http://trueeconomics.blogspot.ie/2010/05/economics-16052010-eu-on-brink.html
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