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Short-term measures of market action became extremely oversold mid-week, and investors took the Fed’s latest statement as an occasion to launch a fairly typical “fast, furious, prone-to-failure” rally to clear those conditions. How could an economy already plagued by “moral hazard” possibly benefit from the belief that the Fed had provided a “backstop” for speculative risk-taking?
It is only that demand that has allowed inflation to remain low despite the massive expansion of government liabilities far exceeding GDP growth, and of misallocated credit that has produced losses rather than surplus output.
