Great Graphic: Euro, Yen and S&P with QE

These first two Great Graphics come from Adam Button on ForexLive.  They depict the euro and yen with the performance against the dollar matched up with the Fed's balance sheet actions.  The only extraneous event included was Japan's tsunami.

I post these charts because I think they are provocative, but I have serious reservations about them.  Surely we can agree that currency valuation is a relative measure.  It strikes me as misleading to suggest as such charts do that only one side of the equation matters. 

 One would never know by looking at the euro chart, for example, that euro is in the middle of an existential crisis since 2009 that has ebbed and flowed.  One would never know by looking at the yen chart, for example, that Japan itself has been engaged in quantitative easing as well.

Moreover, unlike the Federal Reserve, which buys the risk-free asset of US Treasuries and mortgage-backed securities, the BOJ, like the ECB, buys those assets the private sector is shunning.  The BOJ buys ETFs, REITS and corporate bonds, for example.
 

This bottom graph was pointed out and re-posted by ForexLive from Calculated Risk.  It shows the performance of the S&P 500 performance along the QE and Operation Twist timeline.  What strikes me most about the chart is not that the extraordinary easing of US monetary policy has coincided with higher equity prices, but rather than unlike QE1 and its expansion and Bernanke's hint of QE2 at Jackson Hole in 2010, the  US stock market is rising and even before the weak US jobs data, which to many, seals the deal. 

The same can be said about inflation expectations. Before previous balance sheet expansion exercises, inflation expectations were stable or falling.  Now they seem to be rising.  

Lastly, I am still struck by the fact that the US economic performance, such that it is, with roughly 2% growth and 2% inflation and 8.1% unemployment, a stock market up roughly 14% year-to-date and a long-term bond yield that is below GDP would be seen as a major success by most of the other high income countries.  What Bernanke and Co in effect are saying is that while this may be good enough for them, it is not good enough for the United States.