The End of Easy Money
It seems like we have been living through crazy times the last few years, but the larger abnormality may be the decade before it - at least from the sense of monetary policy. After the financial crisis of 2007-2008, when traditional measures failed, the Fed put forth what may be one of the largest economic policy experiments in the history of the US: Quantitative Easing. This tool includes large-scale asset purchases by the central bank of U.S. Treasuries, federal agency debt, and mortgage-backed securities. By taking these bonds off the market, it replaces them with cash, tremendously increasing the liquidity in the system. More money in the system means consumers and businesses alike can access capital at low (close to 0%) rates of financing. And so began more than a decade of “easy money.”
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