Washington has systematically been abusing the Fed.
The real bubble might not be stocks, bonds, gold or anything traded on the markets. The Fed may have built a bubble around Washington (or maybe better, a cushion) where the politicians can do anything they want without consequences to Wall Street.
The op-ed in the Wall Street Journal today from former Fed bond buyer Andrew Huszar is the buzz in markets today and his line of thinking is gradually gaining traction. He sums it up like this:
Because QE was relentlessly pumping money into the financial markets during the past five years, it killed the urgency for Washington to confront a real crisis: that of a structurally unsound U.S. economy
It’s common wisdom that the decision not to taper in September was wise because of the coming shutdown. Maybe if the Fed had tapered and the market sold off there would have been no political appetite for a shutdown and debt ceiling fight? Maybe if the Fed hadn’t been relentlessly pumping money into the economy, Washington would grow up and put the economy on track?
