With U.S. stimulus fading, Fed can’t ignore stagnant global growth, Morgan Stanley argues
“There have been three times when shocks from outside the U.S. have hit home — the late 1990s, encompassing the Mexican peso crisis, the Asian financial crisis and the collapse of Long-Term Capital Management; the 2011-13 European recession; and the 2015-16 Chinese slowdown. The Morgan Stanley note points out the Fed has responded on all three occasions.”
USAGOLD note: The next international shock can come from any one of several locations – or more than one all at the same time. The Fed is trying to throw a blanket over the problem with lower U.S. rates, and, yes, we agree with Morgan Stanley it is much larger factor in monetary policy than many think due to the potential for default on dollar-denominated debts and the fear of igniting a contagion if it fails to move.