Hussman: Bearishness Is Strictly For Informed Optimists

...

[On QE's endgame:] Global central bankers are locked in a contest to find out who can create the most psychotic variant of quantitative easing, Ben Bernanke's grotesque brainchild, before irretrievably destabilizing the global financial system once again. Attached to an incorrect understanding of the Phillips Curve (which is actually a relationship between unemployment and wage inflation, and real wage inflation at that), central bankers seem to overlook that quantitative easing provokes neither inflation, nor employment, nor industrial production, nor real investment, nor consumption. The entire operation involves buying up income-producing bonds and replacing them with zero-interest money. Since every dollar of monetary base has to be held by someone until it is retired, the goal of QE is to provoke discomfort with the form in which investors are forced to hold their savings. That doesn't encourage people to save less. They just look for alternative forms of saving.

...

It's endlessly fascinating to hear central bankers talk about the effect of monetary policy on inflation and the economy, because they confidently speak as if the models in their heads are true - even reliable. Yet virtually nothing they say can actually be demonstrated in historical data, and the estimated effects often go entirely in the opposite direction. This is particularly true when it comes to inflation and unemployment - precisely the variables that are the targets of central bank policy.