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, OfTwoMinds.com:
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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