QE2’s Effectiveness

This post is an update to that of December 9, 2010, “Measuring QE2 Effectiveness.”

There are many different ways one could use to gauge whether QE2 is successful.  Of great significance, I am not aware of any official statement that specifically states the goals (and metrics of such) of QE2.

However, lowering of interest rates, especially that of the 10-Year Treasury, appears to be a/the primary goal.

Below is a chart of the 10-Year Treasury yield, starting on November 3, 2010, the date of the announcement.  The actual asset purchases began on November 12:

(click on chart to enlarge image)(chart courtesy of StockCharts.com)

As one can see, the 10-Year Treasury yield has risen substantially over this period, rising from 2.594% on the close of November 2, 2010 to 3.725% as of yesterday’s (February 8, 2011) close.

As for the goal of (modestly) increasing inflation, there are no daily CPI values available for this period.  However, if one uses values from the Billion Prices Project (which I discussed in the November 24 post) as a proxy, the index values have increased.  The index was 100.76 on November 3;  100.6679 on November 12;  and 102.0273 on February 7.

I plan on further commenting upon QE2 and its apparent effectiveness in future posts.  (all past posts on Quantitative Easing can be found here)

A Special Note concerning our economic situation is found here

SPX at 1324.57 as this post is written