Recovery and the Fed's 'Exit Strategy'

Since the 2008 financial crisis, the Federal Reserve's policy has been to keep interest rates at about zero percent, and to run a program called "quantitative easing" (or QE), which is designed to pump money into the system by buying U.S. Treasury bonds, mortgage-backed securities, and other assets.  These policies will someday need to be reversed (or unwound) in order to prevent "price inflation."  This reversal of policy consists of raising interest rates and selling the Fed's recently acquired assets.  It is called the Fed's "exit strategy." As early as 2009, critics warned about the difficulties of the Fed's exit strategy and its potential for failure in preventing price inflation.  After a speech by Fed Chairman Ben Bernanke at the London School of Economics, the British newspaper The Telegraph on January 13, 2009 reported: Mr Bernanke is acutely aware of critics who fear that the Fed is storing up trouble by "printing money" and stoking a Zimbabwe-style...(Read Full Article)

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