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I'll admit it. I've been a Keynesian. To me, pumping money into the economy, and monetizing debt through quantitiatve easing (i.e., printing new money), was the best course of action since 2008 because the alternative -- a Japan-style deflationary spiral -- was unacceptable and entirely avoidable. Inflation, of any amount, was worth all the risks.

But something curious is going on. The economy is not recovering in a robust way. After today's disappointing retail sales trend continued, Goldman Sachs lowered their 2Q GDP estimate another 2/10ths to 1.1%. They had dropped it to 1.3% from 1.6% just last week on more dismal economic data.

Yet financial markets -- stocks, bonds, gold, commodity prices -- seem to really benefit from QE. Below is a chart from a group called Phoenix Capital Research which plots the S&P 500 index minus the 24-hour pre-FOMC price ramps.

Granted there are other ways of looking at the effectiveness of QE on both markets and the economy. But today I am wondering if QE is still a necessary evil, or if it's actually distorting markets and could possibly damage the long-run health of the economy.

What do you see for the next 6-18 months of the US economy, with or without QE?

Zacks Releases Their 7 Best Stocks for August, 2014

These 7 were hand-picked from the list of 220 Zacks Rank #1 Strong Buys with earnings estimate revisions that are sweeping upward. Their stock prices are expected to rise sooner than the others.

Today, this Special Report is available to new Zacks.com visitors free of charge.

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