- The growth of money/credit during QE1 and QE2 had discernible effects on stock prices, credit spreads, commodity prices and the US dollar. Less obvious but still true, these programs also boosted business revenues
- Creating new money & credit results in higher stock and other financial asset prices. But the new liquidity impacts fundamentals at the business level, in addition to providing a new source of purchasing power for financial assets
- The cyclical margin boost that arises as new money/credit boosts revenues is temporary and subject to a reversal of the processes that helped create the initial margin expansion
- Historically, commodities moved in opposition to financial assets (stocks and bonds). Now, commodities tend to move with equities and together against bonds. QE enhanced this trend
- The 2008 credit bust slowed leverage growth in the US economy, but did not reverse it. By contrast, Japan and the Eurozone have deleveraged to different degrees. All three areas are printing money faster than credit is growing
- Bank reserves have grown exponentially during QE1 & QE2. While US banks have not grown their cash reserves substantially, the US subsidiaries of foreign banks have exponentially grown their cash reserves
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