The discussion in the world’s financial press regarding Fed decision making is framed inappropriately. The discussion is about what is next and how markets will react.
The insanity is that this dialogue passes the sobriety test. Most sit in the theatre, lemming-like, riveted to the action; instead of waiting for the next act, they should demand a refund.
Background: From a recent sketch by George Will: “The Fed has become the model of applied progressivism, under which power flows to clever regulators who operate independent of political control. The Fed is, however, a creation of Congress, which may not forever refrain from putting a bridle and snaffle on a Fed that increasingly allocates credit, wealth and opportunity.”
The tragedy is that Bernanke and others think they can “out figure” the free market, that they, the anointed, have been selected by the market god to efficiently direct resources.
Key to today’s sketch is that this tragedy is expanded by the effort, any effort to communicate with, to embrace the FI market crowd.
As a central banker you must never, ever put yourself in a situation where you feel obliged to engage. You are then held hostage to what is almost always a reaction in the extreme – this is as true of a lynch mob or the Bastille as it is of this bunch.
So when our activist Fed chair hints of an ease in QE, rates erupt; he then feels forced to say he will continue with QE, and so on; thus additions are made to this house of cards before our very eyes.
Observers feel betrayed, pouting because in their view the Fed double-crossed them on Sep/18. The Fed’s credibility “is now shredded,” whines one street economist. “They can’t be trusted.”
KC Fed pres George warns that the Fed’s message has been muddled and the Fed has surrendered at least some of its credibility. The Fed, “…will have to think about the challenges that come with issues of credibility….” “The actions at this meeting, and the expectations that have been set relative to how markets were thinking about this, created confusion, created a disconnect.”
Of course; there could be no other result.
There is nothing sinister here. There is perhaps no intent to deceive; policy makers are simply not trained for the task at hand. But it is “the task at hand” that is the problem.
Robert Craven
The insanity is that this dialogue passes the sobriety test. Most sit in the theatre, lemming-like, riveted to the action; instead of waiting for the next act, they should demand a refund.
Background: From a recent sketch by George Will: “The Fed has become the model of applied progressivism, under which power flows to clever regulators who operate independent of political control. The Fed is, however, a creation of Congress, which may not forever refrain from putting a bridle and snaffle on a Fed that increasingly allocates credit, wealth and opportunity.”
The tragedy is that Bernanke and others think they can “out figure” the free market, that they, the anointed, have been selected by the market god to efficiently direct resources.
Key to today’s sketch is that this tragedy is expanded by the effort, any effort to communicate with, to embrace the FI market crowd.
As a central banker you must never, ever put yourself in a situation where you feel obliged to engage. You are then held hostage to what is almost always a reaction in the extreme – this is as true of a lynch mob or the Bastille as it is of this bunch.
So when our activist Fed chair hints of an ease in QE, rates erupt; he then feels forced to say he will continue with QE, and so on; thus additions are made to this house of cards before our very eyes.
Observers feel betrayed, pouting because in their view the Fed double-crossed them on Sep/18. The Fed’s credibility “is now shredded,” whines one street economist. “They can’t be trusted.”
KC Fed pres George warns that the Fed’s message has been muddled and the Fed has surrendered at least some of its credibility. The Fed, “…will have to think about the challenges that come with issues of credibility….” “The actions at this meeting, and the expectations that have been set relative to how markets were thinking about this, created confusion, created a disconnect.”
Of course; there could be no other result.
There is nothing sinister here. There is perhaps no intent to deceive; policy makers are simply not trained for the task at hand. But it is “the task at hand” that is the problem.
Robert Craven
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ReplyDeleteGreat blog...I enjoy your writing style: clear, concise, authoritative, and correct. The existence of the FED is the problem. Thank you.
ReplyDeleteThank you for your kind words John. All the best.
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