NEW YORK ( TheStreet) -- The Fed understands that it must quickly wind down QE, lest the experiences of 2001 to 2007 be repeated. During this fateful period, the Fed maintained too much monetary accommodation for too long (2001-2003), and then failed to remove the excess liquidity from the economy in a timely fashion (2003-2007). The result was the formation of asset bubbles and relative price distortions, which ultimately led to devastation of the U.S. financial system and overall economy.Still, cognizant of these risks, many Fed officials are also concerned that economic growth in the U.S. is very weak and vulnerable to reversal. These officials fear that removal of monetary accommodation could trigger instability in credit markets, which could in turn derail the weak recovery being experienced in the real economy.
The Fed's Jedi Mind Trick
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