The Fed Confirms QE Lowers Liquidity

The Fed Confirms QE Lowers Liquidity

In a recent talk, Portfolio Manager Steven Van Metre points out that contrary to public opinion, QE doesn’t “flood the system with liquidity”, but actually withdrawals liquidity from the Petro-Euro Dollar system. The irony of this is, that the Federal Reserve themselves published an article in 2014 confirming this to be the case:

The Liquidity Trap: A Reason for Today’s Low Inflation | St. Louis Fed
In a liquidity trap, investors hoard money because the opportunity cost of holding money is zero when the nominal interest rate is zero.