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La Stampa - Italy | Sunday, September 16, 2012

Fed's financial policy imperils financial system

The prospect of a new flood of cheap money from the US central bank, the Fed, gave financial markets all over the world a boost on Friday. On Thursday evening the Fed had among other things announced new purchases of mortgage-backed securities to stimulate the US economy. But this third round of quantitative easing won't be effective, the liberal daily La Stampa admonishes: "Twice already the Fed has used cash injections to boost the economy. Both times the cheap dollars benefited mainly financial deals involving oil or gold instead of investments in the real economy. … To err is human, but to insist on an error is devilish. … It looks like Fed chief Bernanke is convinced that the two previous cash injections weren't hefty enough or were too short-term. But the securities that the Fed will buy now are of poor quality and will weigh heavily on its already fraught balance sheet. The markets will exploit the uncertainty. They will unhinge both the US financial system and the global financial system."

» To the complete press review of Monday, September 17, 2012

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