September 23, 2013 11:05 pm

Fed’s reality check for the economists

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From Mr J Paul Horne.

Sir, Wall’s Street’s surprise and the equity market’s surge after the Federal Open Market Committee’s decision to continue QE3 illustrates that: financial economists’ reading of the underlying US economic situation is very different from that of the Fed; equity markets have become addicted to no-cost (in real terms) capital; and markets under-estimate the economic consequences of fiscal policy paralysis caused by ideological extremism.

In addition to the Fed’s realism about the economy and politics, we must hope that it is equally vigilant about today’s nascent bubbles.

J Paul Horne, Alexandria, VA, US

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