Fed In a Trap?

"The sheer size of financial assets today relative to the size of the economy suggests that the tail may be wagging the dog. Any significant decrease in the price of securities is likely to damage consumer confidence. A reported 56 percent of U.S. households hold common stocks either directly or through retirement accounts, and the correlation between confidence and stock prices has grown. Total financial assets in the United States now represent 565 percent of gross domestic product.

"A great benefit of possessing the world's reserve currency is that America can float its ever-expanding debt despite large and growing long-term liabilities. A remarkable 50.9 percent of U.S. sovereign debt matures in the next three years. The weighted average cost of America's outstanding debt is only 1.38 percent. With more...