Debt

Why The Fed’s Monetary Policy is Failing

<h2><a href="http://www.professorhollybell.com/wp-content/uploads/2013/11/ID-100165710.jpg"><img class="alignleft size-medium wp-image-2622" alt="Debt" src="http://www.professorhollybell.com/wp-content/uploads/2013/11/ID-100165710-300x199.jpg" width="300" height="199" /></a>"There are studies that indicate that economic growth slows when public and private debt exceeds 260% to 275% of GDP. The U.S. hit the 260% level in 2000."</h2> <p>A recent paper by Hoisington Investment Management Company (<a href="http://www.hoisingtonmgt.com/pdf/HIM2013Q3NP.pdf" target="_blank">available here</a>) does an excellent job describing why the Federal Reserve is, and will continue to be, unsuccessful in its efforts to engineer economic growth by devaluing the U.S currency and attempting to increase inflation through persistent “Quantitative Easing”. They cite four factors:</p> <p>1)    <b>The Fed’s Forecast</b>: If the Fed’s forecasts were consistently right, we could have confidence that their actions might positively impact the economy. However, their forecasts for GDP and inflation have been “consistently above the actual outcomes”. They assume higher stock prices will lead to more spending because people feel wealthier if their portfolio is rising. This “wealth effect” has not occurred,

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