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If the Fed Follows the Market, Why Won't Rates Go Negative?
Does the Fed Follow the Markets? It appears that way, but if all the Fed does is follow the markets, why do we need the Fed at all? Fed Uncertainty Theory I discussed the above question in detail, on April 3, 2008, before the collapse of Lehman in the Fed Uncertainty Principle. It is still one of my favorite posts. Here are the key ideas. The Observer Affects The Observed Most think the Fed follows market expectations. However, this creates what would appear at first glance to be a major paradox: If the Fed is simply following market expectations, can the Fed be to blame for the consequences? More pointedly, why ... (full story)
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