Most of the last recessions have been linked to over-tightening by the Fed. This is a fact that cannot be ignored.
Why? The Fed's tools--control of money supply and rates--are very blunt instruments. Or, to mix analogies, when you cut the engines on a super tanker, it takes a long long run to get the thing stopped. It also takes a long time to get the thing speeding up again. So, the Fed has to anticipate 6, 9, 12, or more months ahead. In actual fact, as the Fed's record shows, predicting the economy that far ahead is not a science and more like educated guesswork.
Lest anyone complain that the Fed should be abolished if it is so crappy bla, bla, bla....: 1. Mr. Greenman got it pretty right through most of the 90s and we (at least I am) are very grateful for our gains, & 2. Like "democracy," it's a terrible system but it is better than the alternatives.
Ciao,
David Todtman |
