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Will The Expansion End With A Fizzle Or A Bang?

July 29th, 2017 · No Comments

  • The Fed could very well raise rates because they fear the prospect of higher inflation and imploding asset bubbles bringing down the economy.
  • So if they act, the economy goes out either with a fizzle or a bang.
  • But, as it turns out, the risks of accelerating inflation is remote and an asset crash isn’t likely to bring the economy down.
  • The fundamental problem is that interest rates aren’t a very effective policy tool and cannot serve two masters, the real and financial sectors.
  • The fundamental problem is that there is too much investment in the financial sector and too little in the real economy, and interest rates cannot correct that.

Source: Will The Expansion End With A Fizzle Or A Bang? | Seeking Alpha

Tags: Monetary policy