The Truth Arrives: JPM Slams ZIRP – “It Has Been Impeding Rather Than Promoting Economic Recovery”

Tuesday, November 3, 2015
By Paul Martin

by Tyler Durden

Earlier today Bill Gross joined the ever louder chorus of voices saying that “unconventional” monetary policy in its current iteration is not working to boost the economy (even if it is quite effective at boosting asset price inflation), however a far more prominent critic of the Fed’s status quo emerged last week when JPM’s economist David Kelly released a paper titled “Avoiding the Stagnation Equilibrium” in which he flat out rejects the conventional wisdom canon and says that “zero interest rate policy actually reduces demand in the economy, prompting the Federal Reserve to prescribe even further doses of a medicine that, for a long time, has been impeding rather than promoting economic recovery.”

Of course, there were no such calls by JPM in 2008 and 2009 when it was QE – a logical continuation of ZIRP whose effects were insufficient to boost asset prices and the stock of JPM – that saved not only his employer but the entire financial industry together with taxpayer-backed loans and guarantees that backstopped the western way of life as we know it.

It is also odd how such calls for a rate hikes emerge only after there has been a 200-some point rally in the S&P500, following a drop resulting precisely due to concerns of a tighter Fed.

We doubt, however, that his recent refutation of all that is Neo-Keynesian will be sufficient to brand him a tin-foil hatter: he merely admits what others such as this website have said all along: the epic build up in debt may have helped holders of assets but has dramatically hurt the overall economy and the middle class.

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