Stupidity isn't limited to SI:
Fed Governor Laurence Meyer, an influential member of the Fed's policy board, has also spoken of the need to ``calibrate'' rate cuts so as to avoid giving the economy too much gas and stirring up inflation pressures.
This is another fool who believes that too much "gas" causes inflation. Somehow he believes rates and money supply are strictly inversely related. Further, he believes that rapid growth in money supply leads to excess demand and that leads to higher inflation. None of the three factors in the above two sentences are working or have been working in a way that is consistent with Meyer's view. What interest rates are doing is unconnected to what the economy is currently doing. Interest rate policy has almost no consequence to money growth now. FED is doing almost daily outright injections which has had the effect of propping the economy, but what is being propped is prices more than output which enables the labor displacement to maintain upward pressure on prices. Since loan making is non-existent, interest rates have no consequence to money supply. Demand, output, and productivity are all flat.
Meanwhile Solomon AGonistes says,
In contrast, Greenspan in his latest testimony stoked expectations of further cuts, saying with uncharacteristic bluntness the ``subpar economic performance'' is not over and the economy ``may require further policy response.''
Well, which is it? Are we going down or up? What is down or up? These two don't know. They react to what has happened in the past. At least the market reacts to what is happening in the present. They act like they look forward, but they don't take action on their projections because the projections are reliably wrong. So they wait to get corroboration about a policy action taken in the past. Then they react to the latest data assuming it is connected somehow with a previous policy action. So they act based on their mistaken judgements from the past. That's worse than random, and so find the improbable path to failure. |
