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wealth and QE2
The famous sayings 'Money attracts Money' and 'the rich get richer' will be more true than ever for the next few years. The Fed decided to pump money in the system by buying $600 billion of bonds, hence flolding the system with cash. Will you see that cash? Of course not. The Fed wants to make lending more accessible, hence it buys bonds to decrease the interest rates. So far so good, if medium sized businesses get access to loans, it should give a boost to the economy as businesses can finance their inventory at a cheaper rate. This being said, that cash will probably be hijacked by Wall Street and not pumped in the economy as expected. Emerging markets are performing well, they even need to increase their interest rates to fight inflation, so where is all that free money in the US going to land up? In the emerging markets of course. Carry trade, commodities, land, etc. Borrowing for free in the US (financed by the Fed) and investing in emerging markets, that is what we all should do, because that money i
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