Fed buying equities

I picked this idea up, the Fed buying equities, from Roubini’s interview. At first, I thought that the idea was crazy, but after thinking about it for a moment, I thought “why not?”

As many of you may already know, the marginal effectiveness of any further monetary easing is being weakened. The period of rally after the Fed pumps money into system is getting shortened.

And, to add insult to injury, the initial conditions of each QE is getting worse. Maybe we are right now not in an urge situation, forcing us to take actions quickly, but the likely outcome of a QE is getting clearer. In other words, when the first two rounds of QEs were being implemented, we at least had a hope that maybe this doze we are taking might actually revive the economy.

But rather, we are right now left with a situation where the Euro zone is about to dismantle, and the Fed has a proven track record of not being able to lower unemployment rate and instill growth into the economy.

So the thinking goes, given that the Fed is ultra sensitive to the movements of the stock markets, do you guys think that the Fed could one day buy up equities in the secondary market??

I think we are living in a period where unthinkable is becoming thinkable.
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