Big Ben

Is the Fed helping or hurting?

In an era where the loudest, most passionate voices often seem to gain credibility simply by cranking up the volume, it’s useful to back up and look at some of the fundamentals.

Monetary policy is complicated. It acts with long and variable lags. It’s easy to misunderstand, and even easier to distort. A lot of folks have garnered a lot of (underserved) attention for themselves and made a lot of money by attacking an institution that has multiple, conflicting mandates: low inflation, full employment, and a safe and sound financial sector.

To go back to the beginning—that is, to go back to 2008—money market funds were hemorrhaging cash. The Fed put guarantees in place and actually purchased on its own authority the corporate money-market obligations that keep our economy working. When those obligations began to run off, they replaced them with Treasury Notes. But when deflation started to hit, they initiated QE2, then QE3. And inflation is still moderate.

There are those who think the Fed’s monetary puts the economy on steroids. But speaking from experience, sometimes steroids are necessary to keep you alive.

Hit reply if you have any questions—I read them all!

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2013-03-11T09:00:17+00:00 March 11th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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