Originally posted on Michael Roberts Blog:
Stock markets rocketed up and the dollar fell on the news that the US Federal Reserve had decided not to reduce its planned monthly purchases of US government and mortgage bonds after all. The prices of shares and commodities shot up because investors concluded that the US central bank was going to continue a while longer with its huge injections of ‘liquidity’ (dollars) into financial markets. They had been told by the Fed in June that it was getting ready to cut back on its purchases of bonds starting this month. But the Fed decided to wait.
Part of the reason for the Fed’s delay on beginning the process of ‘exiting’ from printing money was that the bank was still not convinced that the US economy was growing at a sufficiently fast and sustainable pace to get unemployment down and to expand without the help of liquidity injections. Indeed, the…
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