We hear news of the US Fed Reserve toying with the idea of discontinuing the USD 85 billion a month bond buying program. As anyone with basic economic sense would see, there are pros and cons with both sides of this action. If the Fed stops the stimulus, easy money is gone for the US..and thus further investment may be hampered. On the contrary, if they keep on pumping the money, the USD depreciates faster vis-a-vis the other world currencies and the debt crisis in US rises further without any guarantee that the additional money is going to further the investment climate in the economy.
The above is only a simplified analysis of what the stop on the ‘bond buying program’ can cause. And there are many forums where we can find deeper analysis on the pros and cons of both sides of the plan.
What pains me most is the fact that the US Fed Reserve has kept the world economies in limbo from the last few weeks. First, they sent out a statement that are gonna stop the stimulus soon. Then, Mr Fed Reserve Governor comes back saying we are only mulling the matter and will do so in due time.
While there is nothing wrong in Fed Res taking a stance on continuing or stopping the stimulus program, what is totally unethical is the Fed lack of conviction in its approach and the mis-information they throw out in the world in an obvious attempt to test the results of such a step (even before they have taken such a step).
It is time the Fed stops trying to time the market like an novice investor and play the game like a pro.