10/09/18

Fed Should Buy Stocks In The Next Recession: Former IMF Chief Economist



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Fed Should Buy Stocks In The Next Recession: Former IMF Chief Economist
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Our economy's journey to becoming Japan will take one giant step forward if former IMF chief economist Olivier Blanchard has his way. His "outside the box" solution for our next recession? The Fed should buy stocks, finance the federal deficit and buy goods. He detailed this thought provoking idea at the Boston Fed's monetary policy conference that took place this past weekend.

This thinking comes as a result of a "general sense [that] the Fed has to re-think its approach to combating recessions," according to a new MarketWatch article.

Why must it re-think its approach? Because the Fed itself has eliminated most of its tools used to fight recessions by keeping the United States in a lower interest rate environment for too long, instead of raising rates as the market roared. Now we have a stock market at all time highs and record debt levels yet again - but this time with a Federal Reserve that has far fewer options to combat the next recession than it ever has had in the past and with a neutral rate of interest that is lower than it has ever been in the past.

Fascinatingly enough, economists are only now starting to realize that this lack of firepower could be a detriment to the Federal Reserve in the future. Blanchard stated over ....

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