The Phaserl


Could the Fed Lose Control of the Frankenstein Economy It Has Created?

What if there are tail risks present in the Fed’s Frankenstein Economy of the same sort that Greenspan et al. failed to identify in 2008?

by Charles Hugh Smith,

A longtime correspondent emailed me last week about the apparent contradiction between a Federal Reserve that has had the power for five years to counteract any decline and my call for a market decline in 2014: why would the Fed allow a market it has pushed higher for five years to ever fall?

It’s an excellent question, as it summarizes the key question: is there any limit on “don’t fight the Fed?” Can the Fed push assets higher essentially forever? And if so, why did it fail to do so in 2008?

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