Somewhat surprisingly, Reuters’ Felix Salmon has a favourable take on the right-wing letter to Bernanke, imploring him to end QE.
Felix writes: “Markets have definitely been distorted by QE2. Here’s a screenshot from Reuters’s brilliant interactive graphic.”
So basically everything has surged since the infamous Ben Bernanke Jackson hole speech on August 27.
Does that prove that QE is blowing a bubble? It might, but remember, that speech was followed up on September 1 with a blistering ISM reading and the market rocked higher that day. And ever since then we’ve been getting consistently better-than-expected economic news, as this (slightly) out of date Surprise Index chart shows:
If you think the economy has firmed since the end of August, you’d expect to see big gains in equities, commodities, a slide in the dollar, and a selloff in longer-dated Treasuries, all of which we’ve gotten.
It’s possible that QE is a better explanation, but you’d expect the winner of the American Statistical Association’s Excellence in Statistical Reporting award to not jump so quickly to one explanation.