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- Financial conditions have eased to the same levels as 2007
- This comes in spite of central banks thinking they are running restrictive policy
- The nature and timing of the market moves suggest these not so much reflect or anticipate the strength of the economy as drive it
- Their ultimate cause is easy balance sheet policy having crowded investors into risk
- Misunderstanding of these dynamics increases the likelihood of bubbles and subsequent busts
- The latest central bank research on QT is careful, rigorous, and grounded in the literature
- Unfortunately its main conclusion – that QE affects markets while QT doesn’t – is at odds with the lived experience of most market participants
- There is a much simpler reason why QT has had so little apparent impact
- Misunderstanding of this dynamic greatly contributes to the likelihood of future policy mistakes
