4 ms·

The Federal Reserve's job is to keep the banking system afloat, w/ the big banks functioning and well fed. And they do a good job of it. Everything else in "t

The Federal Reserve's job is to keep the banking system afloat, w/ the big banks functioning and well fed. And they do a good job of it. Everything else in "the economy" is incidental.

debo_ 5y ago
I hope "well fed" was an intentional pun!
- HPsquared 5y ago
  Not underfed or overfed.
nabla9 5y ago
To be clear, that's your (somewhat cynical) opinion of what their job is. I assume that you think Fed is cynical and sinister organization. Their offical job description is. "maximum employment, stable prices, and moderate long-term interest rates." (aka the so called dual mandate).
- jrochkind1 5y ago
  If you want to be cynical about it, I don't think that's even cynical enough. How about: Optimize between maximizing profits of the rich and minimizing chance of social disorder or rebellion from the poor being too numerous and too miserable.
  - dageshi 5y ago
    A quote from a book by Terry Pratchett that springs to mind... "They think they want good government and justice for all, Vimes, yet what is it they really crave, deep in their hearts? Only that things go on as normal and tomorrow is pretty much like today." I've often wondered if for the majority in a lot of societies, that isn't essentially true.
    - jrochkind1 5y ago
      Well, there are some in such misery that things going on tomorrow pretty much like today is intolerable. Which is to some extent both objective and subjective. I guess how stable a social order is depends in part on for how many. (Of course there are also societies in which an extreme minority who wants tomorrow to be much like today can keep it so by raw force; I guess that can be a kind of stability too, with enough force, maybe)
  - nabla9 5y ago
    Indeed. What you describe is clearly populist nihilism. "They" aka the corrupt elite are screwing up "real people" who are poor. Ills of the system are moral issue, not really a structural issue.
    - jrochkind1 5y ago
      Hm, interesting, I don't see it that way, it seems to me that "cynical" interpretation leads to the reverse: that ills of the system are structural, that the fed is fulfilling it's intended structural role in the system -- preserving the stability of an unjust system -- the problem isn't the morality of the people who happen to be in the fed, even the most well-intentioned people will find themselves fulfilling this role (without systemic/structural change), because it's structural. But I see your point about how it (the simple 'most cynical' description) could be interpreted the other way too. I don't agree it is necessarily that way; perhaps that simple one-liner is not sufficient to distinguish the structural from the moral interpretation. I'll have to think on it more.
      - nabla9 5y ago
        Have you considered the possibility that Fed actually has overall positive role (limited by it working within the mandate)? I'm not saying it does. But most people with very negative view barely know what Fed does and why it does what it does. Also they don't differentiate between what tools Fed has and what should be done using other means by Treasury and the rest of the government, but was left to Fed because politics is dysfunctional.
  - ItsMonkk 5y ago
    And if you believe that cynicism, and believe that the market follows what the Fed sets out with, the only question you can really have is: When does it break? We know from the Martingale Betting system that when you have a losing bet, it doesn't matter what sizing you employ. Eventually the risk accumulates and it blows up. We also know from the Kelly Criterion that even if you have a winning bet, if you bet to large, you will go broke. As time goes on, the Feds bets have been getting bigger. They have been keeping more and more losing companies in business. Moral hazard is accumulating. Those that make the biggest bets get the biggest gains allowing themselves to make even bigger bets.
    - fuzzfactor 5y ago
      >In the common telling, the Great Inflation of the 1970s got going because people came to believe inflation would keep spiraling. The surge in gasoline prices wasn’t simply a frustrating development, but a harbinger of things to come, so people needed to demand higher raises, and businesses could feel confident charging higher prices for most everything. This has always been spoken like it's from someone who was not present at all during the Nixon destruction of the US dollar. Or not observant in the least. But that's when people started saying things like this, and after influential people start believing it without thorough questioning, well here we are. The only significant demographic that could demand raises of any kind were unionized workers, who were shortly kneecapped by the Wage & Price Freeze. Businesses at the time almost never felt confident about anything, and only raised prices out of desperation for survival. At least they were allowed a little head start ahead of consumers & workers, and the Wage & Price Freeze was delayed as long as possible (ie prices were allowed to skyrocket) before being strategically kicked in right before workers' pay would have had a chance to drift toward parity. It always takes a lot longer for workers to share in any economic benefits, if at all, with great delay & lag when it does occasionally come to pass. Since it appeared mathematically as if half the wealth in the pockets of a nation's workers had been lost forever in only a few years, yes people believed that inflation would keep spiraling, but nobody thought there was anything that could be done about it since the regime in power was not only crooked to the bone, but working for a corrupt political party which was already too big to fail. There was only one alternative party and they were not math wizards either, and equally untrustworthy. By the time Reagan came along no one with good mathematical recognition could have come close to leadership advisory positions any more because it actually had been too late for a while. They're not betting with their own money anyway, and people already had to accept that the chance of any winnings had become infintesimal by then. Reagan did turn out to be a better actor than people thought at first. But even George Bush Sr. was able to recognize what he called "Voodoo Economics" of the Reagan years because it was not based on reality or things that can be good to actually have faith in. Not that he had a better plan, but at least his hindsight came into focus for a bit. Even the most excellent plan would have had no chance of deployment with the type of economists monopolizing worldwide influential positions by then. So the Bush I Recession ended up based on somewhat different types of superstitions than the Reagan Recession. And here we still are. The problem a decade ago was not fundamentally that the banks had grown too big to fail, but rather the political parties which have proven their economic incompetence had already been too big to fail for longer than most voters have been alive. And neither economists nor the voters can do the math since it is far too complicated for most, plus it doesn't matter anyway since the more powerful are going to extract as much as possible from the financially weakest before it's even more too late for them both. And then there's the pessimistic narratives, but just trying to keep it as positive as possible right now.
throw0101a 5y ago
> The Federal Reserve's job is to keep the banking system afloat, w/ the big banks functioning and well fed. And they do a good job of it. The Fed's job is: > The Federal Reserve works to promote a strong U.S. economy. Specifically, the Congress has assigned the Fed to conduct the nation’s monetary policy to support the goals of maximum employment, stable prices, and moderate long-term interest rates. When prices are stable, long-term interest rates remain at moderate levels, so the goals of price stability and moderate long-term interest rates go together. As a result, the goals of maximum employment and stable prices are often referred to as the Fed’s “dual mandate.” * https://www.federalreserve.gov/faqs/what-economic-goals-does-federal-reserve-seek-to-achieve-through-monetary-policy.htm https://www.federalreserve.gov/faqs/what-economic-goals-does... There is a tension between maximum employment and stable prices though: if the economy is starting to run hot, it means more and more people may be employed to keep up with demand. But if there's too much demand, and not enough supply, inflation starts kicking in (there are other sources of inflation though). So the 'trick' is to know when employment has reached the point of being 'maximum enough', and slowing down the economy then.
- salawat 5y ago
  Ah... Let's define maximum as something completely different from "maximum". That sure sounds like economics. Also sounds an awful like a planned economy lite. But I suppose they call that monetary policy.
- recursivedoubts 5y ago
  The Federal Reserve's job is to protect the banks. Of course they aren't going to come out and just say that. We are all aware of what they, and our economist friends, say they are doing, but we also have eyes and brains.
  - andresgaitan 5y ago
    Excellent
mark_l_watson 5y ago
I would say that the Fed’s job is protecting Wall Street bankers and promoting a rise in stock market prices. I don’t think they care much about regular people.
horns4lyfe 5y ago
Well now thanks to the progressive caucus their job also includes solving racial inequality an climate change. That will work out, I’m sure.

The Federal Reserve's job is to keep the banking system afloat, w/ the big banks functioning and well fed. And they do a good job of it. Everything else in "the economy" is incidental.

debo_ 5y ago

I hope "well fed" was an intentional pun!

HPsquared 5y ago
Not underfed or overfed.

nabla9 5y ago

To be clear, that's your (somewhat cynical) opinion of what their job is. I assume that you think Fed is cynical and sinister organization. Their offical job description is. "maximum employment, stable prices, and moderate long-term interest rates." (aka the so called dual mandate).

jrochkind1 5y ago
If you want to be cynical about it, I don't think that's even cynical enough. How about: Optimize between maximizing profits of the rich and minimizing chance of social disorder or rebellion from the poor being too numerous and too miserable.
- dageshi 5y ago
  A quote from a book by Terry Pratchett that springs to mind... "They think they want good government and justice for all, Vimes, yet what is it they really crave, deep in their hearts? Only that things go on as normal and tomorrow is pretty much like today." I've often wondered if for the majority in a lot of societies, that isn't essentially true.
  - jrochkind1 5y ago
    Well, there are some in such misery that things going on tomorrow pretty much like today is intolerable. Which is to some extent both objective and subjective. I guess how stable a social order is depends in part on for how many. (Of course there are also societies in which an extreme minority who wants tomorrow to be much like today can keep it so by raw force; I guess that can be a kind of stability too, with enough force, maybe)
- nabla9 5y ago
  Indeed. What you describe is clearly populist nihilism. "They" aka the corrupt elite are screwing up "real people" who are poor. Ills of the system are moral issue, not really a structural issue.
  - jrochkind1 5y ago
    Hm, interesting, I don't see it that way, it seems to me that "cynical" interpretation leads to the reverse: that ills of the system are structural, that the fed is fulfilling it's intended structural role in the system -- preserving the stability of an unjust system -- the problem isn't the morality of the people who happen to be in the fed, even the most well-intentioned people will find themselves fulfilling this role (without systemic/structural change), because it's structural. But I see your point about how it (the simple 'most cynical' description) could be interpreted the other way too. I don't agree it is necessarily that way; perhaps that simple one-liner is not sufficient to distinguish the structural from the moral interpretation. I'll have to think on it more.
    - nabla9 5y ago
      Have you considered the possibility that Fed actually has overall positive role (limited by it working within the mandate)? I'm not saying it does. But most people with very negative view barely know what Fed does and why it does what it does. Also they don't differentiate between what tools Fed has and what should be done using other means by Treasury and the rest of the government, but was left to Fed because politics is dysfunctional.
- ItsMonkk 5y ago
  And if you believe that cynicism, and believe that the market follows what the Fed sets out with, the only question you can really have is: When does it break? We know from the Martingale Betting system that when you have a losing bet, it doesn't matter what sizing you employ. Eventually the risk accumulates and it blows up. We also know from the Kelly Criterion that even if you have a winning bet, if you bet to large, you will go broke. As time goes on, the Feds bets have been getting bigger. They have been keeping more and more losing companies in business. Moral hazard is accumulating. Those that make the biggest bets get the biggest gains allowing themselves to make even bigger bets.
  - fuzzfactor 5y ago
    >In the common telling, the Great Inflation of the 1970s got going because people came to believe inflation would keep spiraling. The surge in gasoline prices wasn’t simply a frustrating development, but a harbinger of things to come, so people needed to demand higher raises, and businesses could feel confident charging higher prices for most everything. This has always been spoken like it's from someone who was not present at all during the Nixon destruction of the US dollar. Or not observant in the least. But that's when people started saying things like this, and after influential people start believing it without thorough questioning, well here we are. The only significant demographic that could demand raises of any kind were unionized workers, who were shortly kneecapped by the Wage & Price Freeze. Businesses at the time almost never felt confident about anything, and only raised prices out of desperation for survival. At least they were allowed a little head start ahead of consumers & workers, and the Wage & Price Freeze was delayed as long as possible (ie prices were allowed to skyrocket) before being strategically kicked in right before workers' pay would have had a chance to drift toward parity. It always takes a lot longer for workers to share in any economic benefits, if at all, with great delay & lag when it does occasionally come to pass. Since it appeared mathematically as if half the wealth in the pockets of a nation's workers had been lost forever in only a few years, yes people believed that inflation would keep spiraling, but nobody thought there was anything that could be done about it since the regime in power was not only crooked to the bone, but working for a corrupt political party which was already too big to fail. There was only one alternative party and they were not math wizards either, and equally untrustworthy. By the time Reagan came along no one with good mathematical recognition could have come close to leadership advisory positions any more because it actually had been too late for a while. They're not betting with their own money anyway, and people already had to accept that the chance of any winnings had become infintesimal by then. Reagan did turn out to be a better actor than people thought at first. But even George Bush Sr. was able to recognize what he called "Voodoo Economics" of the Reagan years because it was not based on reality or things that can be good to actually have faith in. Not that he had a better plan, but at least his hindsight came into focus for a bit. Even the most excellent plan would have had no chance of deployment with the type of economists monopolizing worldwide influential positions by then. So the Bush I Recession ended up based on somewhat different types of superstitions than the Reagan Recession. And here we still are. The problem a decade ago was not fundamentally that the banks had grown too big to fail, but rather the political parties which have proven their economic incompetence had already been too big to fail for longer than most voters have been alive. And neither economists nor the voters can do the math since it is far too complicated for most, plus it doesn't matter anyway since the more powerful are going to extract as much as possible from the financially weakest before it's even more too late for them both. And then there's the pessimistic narratives, but just trying to keep it as positive as possible right now.

throw0101a 5y ago

> The Federal Reserve's job is to keep the banking system afloat, w/ the big banks functioning and well fed. And they do a good job of it. The Fed's job is: > The Federal Reserve works to promote a strong U.S. economy. Specifically, the Congress has assigned the Fed to conduct the nation’s monetary policy to support the goals of maximum employment, stable prices, and moderate long-term interest rates. When prices are stable, long-term interest rates remain at moderate levels, so the goals of price stability and moderate long-term interest rates go together. As a result, the goals of maximum employment and stable prices are often referred to as the Fed’s “dual mandate.” * https://www.federalreserve.gov/faqs/what-economic-goals-does-federal-reserve-seek-to-achieve-through-monetary-policy.htm https://www.federalreserve.gov/faqs/what-economic-goals-does... There is a tension between maximum employment and stable prices though: if the economy is starting to run hot, it means more and more people may be employed to keep up with demand. But if there's too much demand, and not enough supply, inflation starts kicking in (there are other sources of inflation though). So the 'trick' is to know when employment has reached the point of being 'maximum enough', and slowing down the economy then.

salawat 5y ago
Ah... Let's define maximum as something completely different from "maximum". That sure sounds like economics. Also sounds an awful like a planned economy lite. But I suppose they call that monetary policy.
recursivedoubts 5y ago
The Federal Reserve's job is to protect the banks. Of course they aren't going to come out and just say that. We are all aware of what they, and our economist friends, say they are doing, but we also have eyes and brains.
- andresgaitan 5y ago
  Excellent

mark_l_watson 5y ago

I would say that the Fed’s job is protecting Wall Street bankers and promoting a rise in stock market prices. I don’t think they care much about regular people.

horns4lyfe 5y ago

Well now thanks to the progressive caucus their job also includes solving racial inequality an climate change. That will work out, I’m sure.