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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED
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To: 2sigma who wrote (34095)3/20/2001 11:05:43 AM
From: FR1  Read Replies (1) of 65232
 
Happy, you are right that congress would be horrible at running monetary policy. Nobody wants that. That's why we have the FED.

What I am saying is that no one ever intended the FED to interfere with our society the way it has and is doing.

It was always assumed that the FED would let the markets do what they are designed to do and only step in when there was a extremely obvious emergency such as run away inflation.

Over the last few decades the FED has decided to change the rules. They believe they should intefere whenever they have a "feeling" it is a good time to do it. The FED says the rational is that that they are being proactive. In other words what they are saying is:

1) I have a feeling that inflation might come soon.

2) If inflation does come, I will have to jack up interest rates and make a mess out of the economy.

3) Therefore, I am going to jack interest rates up now and make a mess out of the economy.

Disregarding the fact that PhD economists all over the nation disagree with their methods of guessing at the future economy, the logic above makes absolutely no sense at all.

Do you think when congress originally gave the FED their powers they expected the FED to go on these wild rampages of raising interest rates up and then bringing them back down - all based just on their highly disputed guess work about what the future might be like?

I think congress expected the FED to leave interest alone and only act in cases of extreme emergency. Those real emergencies only happen only once in decades.

Congress wrote the rules and gave the FED their power. It is congresses duty to tell the FED they meant for them to be used only in emergency. The FED is meant to be a reactive body working on know situations and not a proactive body working on guess work.
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