Monday, April 16, 2007

The Fed: Increasingly Irrelevant?

Very good article over at, by Russell Wood. He cites John Hussman (Hussman Funds), David Ranson (H.C. Wainwright & Co.), John Tamny (, James Surowiecki (The Wisdom of Crowds), and Rex Sinquefield (Dimensional Fund Advisers -- the guy who said something like: "The only people left who do not believe free markets work are the North Koreans, the Cubans, and the Central Bankers.")

All make relevant points that are worth checking out at the source. Wood adds his own accurate two-cents worth: The Fed is 'the last of the socialists.... [T]he market will always be more accurate than a group of two dozen "experts" on a committee. The Fed's current model (i.e. worldview) is flawed and thus their policy is ineffective. The economy is clearly slowing as a result of the 425 basis points of rate hikes from 2004 to 2006, yet inflation is worse than when the hikes began, and accelerating. They are likely to make a big mess real soon, and that makes the Fed as relevant as ever.'

Of course they will continue to mess things up, as they have done since the Fed's inception, even if only to render themselves "relevant."

On the other hand, they are indeed irrelevant when it comes to controlling the invisible hand, because their shenanigans are simply taken into account by that hand, and folded into the results like chocolate chips (or rat droppings) in the cookie dough.

[Thanks to and for the photos, which I have tweaked.]

They have no power over that invisible hand -- never have, and never will. The only thing they can do is mess things up. As Watchdog of Inflation and Godfather of Employment, they are more than ineffective; they're downright counterproductive.

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