Dear Fed: Don't Hike Rates, Fix Your Balance Sheet

The Fed has it all wrong.

The lowest risk to the economy -- and to the Fed's wish to reduce its balance sheet -- is for it to sell bonds now and not raise rates. The Fed cannot take back last week's mistake of raising the Fed Funds Rate, but it could wise up and say that it will not raise rates again until it has stopped reinvesting interest and matured bonds, as it is still doing, and has gotten its balance sheet down to its new normal level. This would be a market-based method -- and a reversal of the quantitative easing (QE) and "Twist" (selling short-term Treasuries and buying long-term Treasuries to push down long-term rates) that brought market rates down to the low levels they attained....326 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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