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Wednesday, May 6, 2009

Printing Money

This article in this morning's Wall Street Journal backs up what I alluded to in my last post, namely that the monetary expansion (money printing) by the Federal Reserve will help produce economic recovery.  This type of policy has worked in the past, and the article details how it helped during the Great Depression.  I believe the stock market recovery we have seen over the past two months is a direct result of the Fed's actions, as a significant amount of the money created has moved into equities.  

There is currently some cautious optimism that we have indeed avoided the worst case scenarios that we faced at the end of last year and that the economy will begin recovering later this year.  Let's hope that's true.  If so, we can then begin worrying about what the after-effects of the Fed's aggressive actions will be, and I am certain there will be some.  The question is: how bad will these secondary effects be? And what should we, as investors, do about them? 

For now,  let's enjoy the ride up as long as it lasts.