``But this "wealth effect" [of QE] only works when the amount of debt in the system is low enough for new paper profits to change behavior. If people already carry too much debt, then they don't feel comfortable borrowing even at historically low interest rates, and inflated asset prices become harder and harder to support. Either they stall or start moving lower, which shifts the wealth effect into reverse and sucks the air out of the economy. The reason that so many economists didn't see housing rolling over and don't think it will affect the rest of the system in any event is that most Keynesian models don't pay attention to society's balance sheet... ''

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