Nobel prize winner Eugene Fama has done his homework on QE and seems to understand the basic accounting behind it that so many others misinterpret. In this CNBC interview, Fama explain to Rick Santelli how the only thing being inflated by QE is the expectation that it has wide ranging impacts on the economy. He explains that it’s a simple asset swap of a version of long debt for short debt and that there’s really no reason for this to impact the economy all that much.
He then went on to explain how winding down QE won’t likely cause an interest rate death spiral. Santelli, not surprisingly, was utterly shocked by some of this. My respect for Fama went up by about a million fold after watching this interview….