Wednesday, November 26, 2014

Money printing leads to higher asset prices and makes it harder for most people to afford

The Federal Reserve, each time there was a problem they flooded the system with liquidity, starting essentially with LTCM crisis in 1998, the Dot-Com crash after March 2000 and the Housing bubble after 2006. 

So I suppose that they would again try to support asset prices. As you know one of the problems of this expansion which by historical standards very moderate in terms of momentum and it hasn't really trickled down to large segments of the population. 

One of the problem is that because of the expansionary monetary policies and asset purchases, numerous assets are not affordable by the majority of the people. So if the Fed decides to print money to support asset markets, the impact may be negative on the economy because the prices would start to rise. 

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