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The Fed’s Been Keeping The Economy Afloat. That’s The Problem.

Wednesday, May 29, 2013 - 8:30 PM
There is good reason to think that monetary easing is doing quite a bit of the work offsetting tighter fiscal policy. The Fed’s policies, including buying $85 billion in bonds each month with newly created money, are directly aimed at housing; $40 billion of those purchases are of mortgage-backed securities, meaning the money is being funneled directly toward the sector. And sure enough, a solidifying housing market is an important part of the economy’s holding up. And a second important consequence of Fed easing is to boost the prices of other financial assets, including the stock market.

So far so good. The bad news, though, is that these channels through which monetary policy affects the economy tend to offer the most direct benefits to those who already have high incomes and high levels of wealth.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/29/the-feds-been-keeping-the-economy-afloat-thats-the-problem/?wprss=rss_business
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