Fed's Primary Motive

Welcome to the grand illusion
Come on in and see what's happening
--Styx

ZeroHedge argues that the primary motive behind the Fed's stock market friendly policies is not to line the pockets of the wealthy, although that is certainly occuring. Instead, it seeks to prop up the value of equity-laden pension funds.

As a fraction of total assets, US pension funds own more stocks than similar funds in other countries. In fact, pension funds in other countries have generally decreased their allocations to equities since the last market meltdown.

By trying to uphold the paper wealth gains of future retirees, the Fed thinks that it will avoid a general decline in confidence that keeps social fabric from ripping.

In other words, the Fed is trying to preserve the legitimacy of the welfare state.

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