The Fed’s change of direction will only fuel America’s growing debt problem

Despite GDP growth of 3%, the US economy is still built on consumer borrowing, and higher interest rates would force millions into dangerous debt

The moment was hugely significant and yet so heavily flagged that it passed without a tremor in the financial markets. Federal Reserve chair Janet Yellen confirmed last Wednesday that the central bank would start to unwind the vast holdings of government and mortgage debt it acquired in the years following the 2008 financial crash.

The Fed, under former chairman Ben Bernanke, more than quadrupled the size of its balance sheet, to $4.5tn, by purchasing Treasury bonds and mortgage-backed securities under a programme dubbed quantitative easing (QE). Many were from the effectively bust Fannie Mae and Freddie Mac mortgage lenders.

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