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Martin Armstrong And Bill Gross Are Wrong About Quantitative Easing

Elliot Wave Technical Analyst & author @ Elliott Wave Trader
May 6, 2016

I was sent an interesting note by Armstrong this morning about his perspective on quantitative easing.  In it, he addresses how Bill Gross is wrong about QE.  While his ultimate point is correct, his underlying analysis is wrong:

https://www.armstrongeconomics.com/armstrongeconomics101/basic-concepts/why-the-quantity-of-money-theory-is-dead-wrong/

Respectfully, Mr. Armstrong misses one MAJOR point:  The Fed did not create "cash," but rather made more debt available through the QE process.  And, it is not that people are hoarding their cash, as that is a different issue, and has nothing to do with QE.  There was NEVER any "cash" created by QE.  EVER.  Not one dollar.

QE was about making more debt available to the public.  They attempted to increase the supply of credit, which is another form of money other than actual cash, or greenbacks.  But, sufficient demand for the newly available debt was not there in order to cause the increase in money velocity, therefore, inflation was not "created." 

This is a common mistake made, and unfortunately, it shows how much the public really does not understand QE and why it failed. But, those of us who really do understand how QE works actually wrote about how it would fail years ago.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live Trading Room featuring his intraday market analysis (including emini S&P500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education. You can contact Avi at: [email protected].


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