The issue behind the Fed’s guidance

Let us start first with the economics. The following article explains very concisely what is going on now with the Fed, and with all central banks for that matter:
RICHARD KOO: Forget Hyperinflation — The Fed Is Now Facing The True Cost Of Quantitative Easing

The Fed has got itself, with the tacit agreement of the US government, into the business of managing the economy. It is management, not guidance, what the markets are expecting right now. As Richard Koo describes in his article, the risk is now that the Fed is actually trapped in a loop. If it withdraws QE, or even it just announces it, rates go up and everyone gets very nervous about the economy. If it does not withdraw QE the economy grows more and more dependent upon the Fed.

The real issue though is not QE. The real issue is who gave the Fed a mandate to manage the US economy, and the world economy in fact. No one did.
The US is rapidly getting into a state of confused governance. The government does not work in conjunction with the legislative to implement fiscal policy and real structural reforms, hence the Fed has taken over and the only policy being implemented is…money printing.


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