It's hard not to be cynical about what the markets are supposedly telling us this week.
The Great Debate
Please don’t call it a liquidity crunch, but it rather looks as though China might have had to sell a sliver of its vast hoard of U.S. Treasury paper to fund its private sector’s big overseas foray.
Intense criticism of the Fed’s role in the financial rescue program and the decision to triple its balance sheet, including monetizing a portion of the Treasury’s debt, has forced the central bank to issue an unusual defense of its actions (http://www.federalreserve.gov/newsevents/press/monetary/20090323b.htm).
The Federal Reserve and U.S. economy have two considerable risks now that quantitative easing is at hand: keeping the dollar from a disorderly decline and figuring out how to dismount from the tiger.