The Federal Reserve made a colossal gamble with its so-called “Quantitative Easing” or “QE,” which is simply a euphemism for its $4.4 trillion binge of buying long-term bonds and mortgages. Its big bid for long bonds, along with parallel programs undertaken by other members of the international fraternity of central banks, has artificially suppressed long-term interest rates, and has deliberately fostered asset-price inflations in bonds, stocks, and houses.
Will this gamble pan out?
There’s some historical elegance to the fact that the Fed’s annual symposium in Jackson Hole, Wyoming, is roughly as old as the modern Fed itself. The symposium, hosted by the Federal Reserve Bank of Kansas City, started in 1978.
In her first formal appearance as head of the United States Federal Reserve, Janet Yellen obliquely suggested the Fed might not raise its mighty “federal funds” rate to tighten the economy until months after its Quantitative Easing bond purchasing ended completely, coyly portending cheap money indefinitely. The market shuddered but soon calmed at the soothing voice of its controller.