“It’s the Fed’s fault! “
It is a rallying cry for such boundless misleading analysis and criticism going back at least to the 1990s, if not earlier.
Has the financial press ever written a “less insightful and lazy line than a Fed-led rally?” As if he is actually a columnist Knows What is driving the market at any given moment of time (or year, that matter).
Blaming the Fed for all the evils in the world has become a cottage industry – of course for booksellers: Easy Money Lords, Torture of the Federal Reserve, Annoyed, Finish the fadeAnd the father of the genre, Jekyll Island Animals.
I’m not even apologizing to the Fed. The Federal Reserve has the subject of 717 posts on this site – both pre- and post-Great Financial Crisis (GFC). When I made the list of who to blame for the big financial crisis, Fed Chair Alan Greenspan was # 1, the Fed’s monetary policy was # 2, and the Federal Reserve was again # 11 in his role as bank regulator. Bailout Nation, Chapter Two, Title “The creation of the Federal Reserve and its role in shaping our bailout nation“If you had told me I was writing this post a decade ago, I would have laughed at you.
Despite this, I try to avoid the simple, lazy tendency to place all the sickness in the world at the feet of the US Federal Reserve. To be sure, the US Federal Reserve’s shortcomings are, in the language of the battlefield, a “target-rich environment.” But at a certain point in time, you must acknowledge the way the world works and avoid overly simplistic, post-hack descriptions. These three Cs explain why:
Complications: The world is complex; The driver of economic results is rarely a single factor.
Counterfactual: What does the economy look like without the US Federal Reserve? What does the world look like without its fluidity?
Causation: It is very difficult to know the exact, specific cause of any event. We can speculate and debate, but we rarely know why.
I can probably add a fourth C: Assurance. I was really amazed at how sure they were that they brought out all our grief and put it at the feet of the Fed.
I don’t have a dog in this fight; However, I hate this kind of lazy analysis that leads investors to a bad and ultimately money-losing path …
How much do we blame the Fed? (February 19, 2020)
How Greenspan Became Former Maestro (August 11, 2014)
K Doshi, 1-25 (June 29, 2009)
Developing a Consensus: Blame Greenspan (June 8, 2006)
Single vs. Multiple Variable Analysis in Market Forecast (May 4, 2005)