Carmen Heinhart has the same thought that I expressed in both my Swaps and Macro articles - that Japan's purchasing of $400B USTs in 2002 was the first QE the US has received. I go much further than Carmen in interpreting the results. This QE brought the US out of the recession we were in - Greenspan did not engineer that - as it created a rally in the longer part of the US curve, impacted swap spreads, created the mortgage refi boom and beefed up money supply. This in turn increased US bank balance sheets. Rates rose once Japan stopped buying USTs in 2003, but the resulting money supply and bump in nM2 velocity from these purchases allowed Greenspan to raise rates again in, restarting the Yen Carry flows and creating the fuel and excess assets for the Great Financial Crisis. You can see the data and analysis after page 80 in my study, in a section called ‘A Closer Look at Fed Decisions’.



www.mbsmantrallc.com/macro



My study is titled 'The Failure of Macro Economics - Carry Trades, Money Flows, and The Pricing of Assets.'



Where I am unconventional is that I show that the recession was caused by Greenspan in 2001 when he cut rates, and that without the Greenspan rate hikes in 2003 we might have reverted back to a recession. To understand why, please read the whole article.

