Kevin Duffy has penned an interesting review of recent Fed rescue missions and their resultant effects on the stock market.
"Financial Markets on Crack" takes a retrospective look at the Fed's tactical eases over a 9 year period (1998-2007), and finds a marketplace convinced of the Federal Reserve's duty to keep the markets and the economy pumped full of (credit) drugs.
An excerpt from Duffy's article:
This is now the third time in 9 years the Fed has acted as "fireman" as many believe is part of its job description:
"Our monetary addiction is a progressive disease now in an advanced state."
As I wrote in Tuesday's post, "Fed bailouts = capitalism?", these actions and interventions do not reflect well on our system of "free markets" either.
"Financial Markets on Crack" takes a retrospective look at the Fed's tactical eases over a 9 year period (1998-2007), and finds a marketplace convinced of the Federal Reserve's duty to keep the markets and the economy pumped full of (credit) drugs.
An excerpt from Duffy's article:
This is now the third time in 9 years the Fed has acted as "fireman" as many believe is part of its job description:
Duffy goes on to review the timing and effect of these past three rescue missions, and questions whether this latest Fed stimulus will work. One thing is certain; Duffy does not find these actions to be indicative of a healthy market or economy.You can't just say 'we told you so' and turn your back. The Fed is the fireman of our economy, and there's a fire and they're gonna put it out. That's their job. Their job is not to sit around and scold people for making bad loans [and] for other people for buying those bad loans. The Fed's job is to put out the fire.
- Peter Yastrow, market strategist, MF Global, August 9, 2007
"Our monetary addiction is a progressive disease now in an advanced state."
As I wrote in Tuesday's post, "Fed bailouts = capitalism?", these actions and interventions do not reflect well on our system of "free markets" either.