Fed Delivers the Message that Our Economy is Dead | First Rebuttal.
I used to get a kick out of the cute little children waiting for the Fed Chair to come and deliver presents or coal. So giddy and excited from the anticipation of not knowing who Janet thinks were good boys and girls. Who’s going to be rewarded and who disappointed? And I don’t know how many people asked me today what the Fed will do. My answer was “The same f@#*ing thing they always do, nothing. So stop asking”.
You see if you read some of Stanley Fischer’s early work on the rational expectation model you find that the key to fixing the lack of long term effectiveness to monetary policy is by confusing the working man. The idea being, people will act rationally with the information they are provided and so what typically happens is that people change their behaviour which counters the impact of the policy being implemented. The solution is to keep us guessing. And so what they have done for essentially every meeting is nothing.
However, they use the media to talk about all the things they just might do. And the pundits on television go on and on about all the things that might happen and what the follow on implications will be given those alternatives and then the moment comes and ahhh nothing, damn they fooled me again! I really thought this time was it gosh golly dang it!. I guess it was just that this or that was just slightly out of place otherwise they said they were totally gonna do this or that. So close, but ultimately they are right. Yep they made the right choice based on all the variables. They are just swell.
