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Outside the Box: The Fed is now enabling politicians to act recklessly

As the dust settles on last week’s market-moving, dovish communications from the Federal Reserve and the European Central Bank, commentators continue to debate the Fed’s independence and the ECB’s wisdom.

Yet, beyond the shorter-term noise of markets and the sting of tweets from President Trump, there is a much deeper issue — that the comfort blanket the Fed and other central banks extend to stock and bond markets is enabling reckless politicians to do and say reckless things.

While the majority of central bankers have engaged in quantitative easing and super-low interest rates out of necessity rather than choice, this is a policy experiment that has arguably reached the limits of its usefulness.

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