QE: real tool, or now just fictional? July 20, 2013 at 7:08 am

Quoth Izzy:

If it’s true that the Fed’s asset purchases are creating liquidity problems in the underlying — so much so that short squeezes are impeding daily market operations, causing settlement fails and negative repo rates — this leaves Bernanke in a tricky communication position… to say “we have to suspend QE because there aren’t enough assets for us to purchase without us becoming the market” is to admit that the Fed’s most important tool — QE — is now broken, which risks freaking out the market completely.

I don’t have a position on whether this is true, but she’s right that if it is, boy will it be a problem if (when) the market finds out.

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