By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com
Ominously for the stock markets, the Federal Reserve is warning that quantitative tightening is coming later this year. The Fed is on the verge of starting to drain its vast seas of new money conjured out of thin air over the past decade or so. The looming end of this radically-unprecedented easy-money era is exceedingly bearish for these lofty stock markets, which have been grossly inflated for years by Fed QE.
Way back in December 2008, the first US stock panic in an entire century left the Fed frantic. Fearful of an extreme negative wealth effect spawning another depression, the Fed quickly forced its benchmark federal-funds rate to zero. Once that zero-interest-rate policy had been implemented, no more rate cuts were practical. ZIRP is terribly disruptive economically, fueling huge distortions. But negative rates are far worse.