Fed Policy goes Global
The Fed’s planned expansion of liquidity, while perhaps aimed at U.S. fi nancial markets, probably has placed upward pressure on foreign asset prices as well. Money flows transcend national boundaries easily in search of returns, and investors have continued to flock to the stock, bond and real estate markets of emerging economies. For example, investor flows into emerging-market equity funds reached an all-time high of $4.2
billion in September, while many country stock indexes from Turkey to Mexico also have reached
record levels.
While this can be a positive development for national economies, it potentially can lead to asset bubbles or other distortions if prices rise too quickly or in too great a magnitude.
Life, Liberty, & the Pursuit of Happiness
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