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Fed's Failed Monetary Experiment About To End


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071514-708937-fed-attempt-at-stimulus-did-not-work-but-has-it-learned-its-lesson-.htmInvestors Business Daily:

The Fed: The recovery is not yet "complete," Federal Reserve Chairwoman Janet Yellen suggested Tuesday, but the central bank plans to let interest rates rise anyway. We'll soon learn just how solid this so-called recovery is.

 

'The economy is continuing to make progress toward the Fed's objectives of maximum employment and price stability," Yellen told Congress, predicting "a moderate pace" of growth for the economy "over the next several years."

 

Sadly, we don't fully share her rosy outlook. Indeed, we think the Fed's extraordinary interventions over the past 5-1/2 years have distorted markets and prices, and have held the economy back.

 

Sure, by its zero-interest-rate policy (ZIRP) and $85 billion- a-month quantitative easing (QE) debt-buying program, the Fed helped push up stock prices. And low interest rates no doubt gave the economy a boost.

 

But now, as the Fed prepares to unwind ZIRP and QE, we'll find out just how resilient the economy is.Scissors-32x32.png


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Telegraph

Fed kicks off global dollar squeeze as Janet Yellen turns hawkish

 

By Ambrose Evans-Pritchard9:00PM BST 16 Jul 2014

 

A vast wash of dollars flooded the global financial system when the Fed cut rates near zero and then bought $3.5 trillion of bonds. This may now go into reverse

 

The US Federal Reserve has begun to pivot. Monetary tightening is coming sooner than the world expected, with sober implications for overheated bourses, and for those in Asia, eastern Europe and Latin America that drank deepest from the draught of dollar liquidity. Scissors-32x32.png

 

Mrs Yellen added the usual caveats about "false dawns". Wages are barely rising. The jobs market is not yet drawing back the millions who dropped out of the system. The labour participation rate is still stuck at a 36-year low of 62.8pc, and at the lowest ever recorded for men. "The recovery is not yet complete. We need to be careful to make sure the economy is on a solid trajectory before we consider raising interest rates," she said. Scissors-32x32.pnghttp://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10972348/Fed-kicks-off-global-dollar-squeeze-as-Janet-Yellen-turns-hawkish.html

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