If You Say QE Has Failed Because Rates Are Going Up, You're Not Paying Attention

This week the WSJ declared on the front page that QE was failing: Rates have gone up, despite the putative goal of QE, which is to lower them.

Yes, it’s true that rates have shot up lately, but does that mean the Fed’s efforts to lower them have failed?

Hardly. Remember, as Frederic Bastiat observed, a key to economics is understanding what is not seen, and in this case, what is not seen is where rates would be sans-QE, a question that’s technically impossible to answer.

But here’s one crude way to take a stab: Where were rates the LAST time the stock market was this high. That was on May 4, and 10-year rates were over 3.6%. Today they’re at 2.85%.


For another look, here’s how the S&P 500 and the 10-year compare since that same day:


So put the rate rise in perspective… while the stock market has surged higher (the recent slide included) rates are still only back to where they were in early August. Calm down before you start declaring the interest rate hikes to be proof that QE IS TOAST.

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