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Was the Fed right to keep stimulus going?

Jonathan Horn, U-T SAN DIEGO

Friday, June 21, 2013

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Kelly Cunningham, National University System
Answer: No

The United States is caught in what Peter Schiff calls the “stimulus trap.” There is no easy exit for an economy highly addicted to monetary stimulus by a central bank. The trap redirects capital into non-productive sectors while starving areas of the economy that could lead to economic rebirth. The result is continuing anemic growth and deteriorating underlying economic fundamentals. By prolonging the stimulus gambit, the Fed only intensifies an eventual and inevitable real correction. Unfortunately, the longer the Fed waits, the more painful the exit will be. We are stuck avoiding short-term pain for much deeper and protracted problems.