“O, that way madness lies; let me shun that; No more of that.” -Shakespeare
Despite an overwhelming consensus that the continued quantitative easing is artificially propping up an otherwise devastated economy – setting it up for a greater inevitable fall – the Fed has announced a ramping up of QE if the economy double dips (1). Furthermore, with inflation being the primary focus of the Fed’s monetary policy, the fact that consumer price measures do not include house prices, creates major discrepancies in accurately measuring inflation and is, incidentally, one of the factors contributing to the massive wealth inequality (2).
This begs the question of why the continued QE. The Fed as much as admitted they know they have created, and continue to feed, an asset bubble—making some stock owners obscenely wealthy—yet the economy has become so reliant on the artificial liquidity, the bubble pop would result in economic devastation. The bottom line: Fed market manipulation is now an irreplaceable feature of the bond market, and by extension, of every other market. The conclusion: stocks and bonds will remain artificially propped indefinitely, until the fiat currencies and central banking eventually, and unavoidably, crash and burn (3).