QE is a drug that has been applied by the Fed in an emergency without going through any FDA type testing procedures

Sir, Barry Eichengreen considers that “The Fed’s monetary tweak is a tempest in a teapot” December 20.

But, considering the fact that the monthly reduction of $10bn in QE gets so much more attention than the $75bn that the Fed will keep on injecting in the economy, in a quite distortive way, all on the long side of the market, all for the treasury and the housing sector, then perhaps a teapot being in a tempest, could be a more adequate simile.

Eichengreen also holds that “the central bank has signaled that it is not prepared to return to normal times until a normal economy has returned”. Sorry, then we might never get there. 

A normal economy will not return until regulators stop using risk weighted capital requirements for banks. Because these allow banks to earn much higher risk-adjusted returns on equity financing the infallible sovereigns and the AAAristocracy than when financing the “risky” medium and small businesses, entrepreneurs and start-up, they do the facto guarantee the market to be abnormal.

And Eichengreen ends by referring to Hippocrates… “It has at least done no harm” What? Is that not something yet to be seen?