Plans to wind down quantitative easing (QE) will likely be up-ended if the United States becomes involved in a military confrontation with Syria, says London-based financial journalist Matthew Lynn. Writing in MarketWatch, Lynn says the Syrian crisis, combined with an emerging market crisis brought about by a potential end to QE, will stop global growth and force the Fed to continue its massive stimulus program.
As quoted in the market news:
If the emerging-markets crisis spreads, and if a military intervention in Syria pushes up the price of oil, then the euro zone will be pushed back into recession as well. Very quickly, 70% of more of the global economy could have ground to a halt.
Where does that leave the Fed? In a fix. In reality, the U.S. cannot simply shrug aside an emerging-market crisis or a conflict in the Middle East as a matter of little consequence. Its own growth depends on trade with those nations, and so does the stability of its banking system. With no expansion in those markets, U.S. growth will evaporate, and with it the case for the taper.