I Am So Shocked

Shocked might be too strong.  More like bemused.

From Business Insider -- Richard Koo says no one can refute his claim that the U.S. is in a 'QE Trap'. 

I am bemused thinking there are people who would even try to refute it or not realize that it is the case. 

Koo, chief economist for Nomura Securities, had initially sent out a note to clients explaining his "theory" after the Fed's September announcement that it would not begin the reduction in QE commonly called Taper.  The Fed, he said, is now facing the true cost of QE.  

"Amid all the talk of ending QE, I think hyperinflation is a less likely outcome than a QE 'trap'," says Koo. "As soon as the economy picks up a bit, the authorities begin to talk about tapering, which sends long-term rates sharply higher and nips the recovery and inflation in the bud, effectively preventing them from winding down the policy. In this kind of world the economy never fully recovers because businesses and households live in constant fear of a sharp rise in long-term rates."

Of course, what Koo fails to mention is the government sector that depends, at this point, on deficit spending in a low-interest environment.  Abe in Japan illustrated our situation by kicking the yen up from 70-something against a weak dollar to nearly 100 against an even weaker dollar to try and keep the rates at zero there. 

It is telling that with all this central planning, central banking, and market intervention we have come to the point where the planners see stagnation as the best possible scenario.  Financial geniuses at work.