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Market Flambe / QEverlasting?
« on: October 26, 2014, 10:21:29 PM »
Okay, I know this about Quantitative Easing: It's an extended program where the Federal Reserve buys dodgy financial paper from the big banks and finance-firms with money it essentially creates out of thin air. This has been keeping the financial markets propped up for the past few years. In fact, it has become a sort of monetary heroin that the markets would flame out badly without, from what I understand.
But now the Fed is talking about cutting back the supply of smack, and the markets reacted badly, recovering only when the Fed basically said, "JK!
" Can anyone explain to me like I'm five years old ("Explain Like I'm Five" began as a Reddit.com phenomenon) what adverse consequences of QE prevent the Fed from doing it forever if the financial markets need it so badly now? I tried posing this question on a thread at TAE and got vague, mumbly pieties that actually explained nothing. I'm looking for an economic nuts-and-bolts explanation of why QE is unsustainable.
But now the Fed is talking about cutting back the supply of smack, and the markets reacted badly, recovering only when the Fed basically said, "JK!
