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Has the Federal Reserve always been this powerful and active? Over the past few years, it seems that they have been molding the economy to their will. Are there

• gjsman-1000 4y ago
  I completely agree with you. We used to sue companies and individuals for the crime of Market Manipulation. Now the Fed is in the business of Market Manipulation as a Service (MMaaS?).
• Analemma_ 4y ago
  They are particularly active right now because they took too long to start raising rates to begin with, and are now kind of frantically correcting. Given the circumstances I don't think there's much else they can do; they should have started gently raising rates in the spring or summer of 2021 and then the current intervention might not have needed to be so dramatic, but we can't undo the past.
  • AnimalMuppet 4y ago
    They tried gently raising rates before that (2018-ish, maybe?) and the market freaked out, so they backed off.
• rglover 4y ago
  > From my naive perspective, it seems like a lot of meddling, and it isn't clear if such frequent changes are required. This is the result of fiat-based currencies and why Bitcoin is a necessity for the survival of Western civilization. In the words of Max Keiser: "you can't taper a ponzi scheme."
  • highwaylights 4y ago
    Can’t tell if this is sarcasm or not. I mean, Max Keiser is quoted so I assume it has to be, but it still doesn’t read like it.
    • rglover 4y ago
      It's not sarcasm at all. It's a 100% correct, accurate, and serious statement. The Federal Reserve was created to manipulate and control currency. The removal of the gold standard made it so that they could, to their heart's content, produce any amount of money and distribute to anyone they wished, whenever they wanted. It is, in its entire conception, an absolute ponzi scheme. It is only in favor because that favor is enforced at the barrel of a gun via the tax system and the petrodollar scheme.
      • snapcaster 4y ago
        I don't see how it's a ponzi scheme. I understand your other parts but ponzi seems like an inappropriate term
        • rglover 4y ago
          The ponzi scheme attribution is due to the money printing and fractional reserve lending system. They can't pay off previous debts [1], so they print more money to try to inflate the debt away (which only leads to the creation of more debt, keeping the cycle perpetual). If they stop printing money/issuing new debt, the whole pyramid collapses. [1] https://www.usdebtclock.org/ https://www.usdebtclock.org/
          • highwaylights 4y ago
            But this isn’t true. Printing money debases the currency, it doesn’t increase borrowing. Not debasing the currency further is the reason all debt isn’t just printed away. Bitcoin is entirely a ponzi, which is why I was surprised you cited it as an example of something better.
• paparush 4y ago
  See Alan Greenspan's entire tenure as Fed Chair.
  • yamtaddle 4y ago
    Most Fed chairs who're around for a recession become a household name, at least for a little while. Which ends up being an awful lot of them since they tend to serve a while. See also: Ben "helicopter" Bernanke; Paul Volcker. And yeah, it's because they do tend to be similarly active, or at least very much in the public eye, when recessions hit.
• GoodJokes 4y ago
• cheald 4y ago
  The Fed's dual mandate is to "maintain price stability" and to "ensure maximum stable employment", both of which are only accomplished through explicit manipulation of the economy. They're an enormously powerful entity, and if they're actually accomplishing their goals, do help keep the economy running smoothly (most specifically, IMO, by improving the confidence of people to make long-forecast economic decisions), but when they get it wrong, they have the potential to cause damage at a scale nearly unrivaled by anyone else.
  • ClumsyPilot 4y ago
    > both of which are only accomplished through explicit manipulation of the economy. You can't have an unmanipulated economy the same way you cant have food without chemicals - sugars, vitamins, micronutrients, water - they are all chemicals. The same in the economy - money supply, interest rate, etc. do not 'just appear', they are 'manipuled', whether by banks, FED or someone else. Someone has to issue currency and run the system You shouldn't be asking wether the system is managed, you should be asking in who's interest it is managed.
• evdubs 4y ago
  This is just the Fed setting interest rates to be in line with the Taylor Rule [1]. As some of your replies have noted, they're aggressive both because of a delayed response to recent inflation as well as a sharp rise in inflation since the COVID lockdowns ended. Note that the Fed has two mandates: maximum employment and price stability. They raise rates in an attempt to reduce inflation and try to reach price stability. Their tools for maximizing employment tend to be much more indirect. [1] https://www.atlantafed.org/cqer/research/taylor-rule https://www.atlantafed.org/cqer/research/taylor-rule / Create Your Calculation / Chart / Compare "Alternative 3" and "Actual Fed Funds Rate"
  • JumpCrisscross 4y ago
    > the Fed setting interest rates to be in line with the Taylor Rule No, it is not. The Taylor rule was proposed as a starting point for discussing a model. The coefficients were chosen for consideration and to "capture the spirit of recent research" [1]. Computational advances rendered obsolete the essentially two-factor model. [1] https://web.stanford.edu/~johntayl/Papers/Discretion.PDF https://web.stanford.edu/~johntayl/Papers/Discretion.PDF
  • ClarityJones 4y ago
    Phrased more cynically the goals of price stability and maximum employment may be phrased as: Suppress wages and prevent workers from attaining financial independence / retiring at a young age.
    • JumpCrisscross 4y ago
      > the goals of price stability and maximum employment may be phrased as: Suppress wages and prevent workers from attaining financial independence / retiring at a young age Economies with runaway wage inflation feature none of this.
      • ClarityJones 4y ago
        Sure, if you only look at "runaway" inflation and decouple wages from real economic growth. However, the present growth in wages has been backed by increased productivity. The Fed has been open about the fact that it intends to slow productivity itself. Fed has been open about the fact that it intends to slow productivity itself (pulling sources now...)
• kodyo 4y ago
  They’re a banking cartel that controls the supply of the world’s reserve currency. Yes they’ve been active and powerful for a long time.
• LatteLazy 4y ago
  Since 2008, the whole economy of the western world has been reliant on central banks to provide capital for free (or even less than that). The fact they are withdrawing that (or trying to) is what makes them suddenly seem powerful. Once we're back to a more normal (in a century point of view) world, they will manage much less. But right now, they are the ones supplying all the capital for everything...
• skybrian 4y ago
  Yes, the Fed manages the US economy, and that’s been its job for over a century. Maybe read about Volker and the 1982 recession. Whether they do a good job or not and what they should do instead is often debated by economists. And yep, economies aren’t self-managing. Before that there were frequent financial panics.
• hyperpape 4y ago
  Paul Volcker's Fed raised rates from 11.2% to 20%, which is widely credited as a major cause of the 1980-1982 recession. https://en.wikipedia.org/wiki/Paul_Volcker#Chairman_of_the_Federal_Reserve https://en.wikipedia.org/wiki/Paul_Volcker#Chairman_of_the_F... Edit: probably should have clarified I think this was probably worth it (inflation came down and stayed down for a long time, and you can’t postpone a recession forever with dovish policy. My only point is that it was a big intervention).
  • AnimalMuppet 4y ago
    And of breaking the back of the inflation that we had in the 1970s.
  • ww520 4y ago
    Paul Volcker was widely credited for stopping the rampant high inflation of the 70's. Volcker is one of the greatest Fed chairs around.
• paulpauper 4y ago
  Has the Federal Reserve always been this powerful and active? yes, the fed intervened in the crash of 1987 too.
• helen___keller 4y ago
  > From my naive perspective, it seems like a lot of meddling, and it isn't clear if such frequent changes are required The federal reserve has exactly 2 mandates: keep prices stable (which they define as a long term inflation of 2%) and reduce unemployment. Unemployment is low, inflation has been far beyond 2%, so the goal is obvious. There’s a technical questions of “how many rate hikes” and “how steep per hike”. But the direction that the federal reserve has been moving is more or less directly implied by their mandate. > If they are required, I suppose that bothers me just as much since it implies a fragile economic system. I’m not sure I agree. On what basis does this imply a fragile economic system? The federal reserve has a tool to achieve their goals, and they are using that tool.
  • bmitc 4y ago
    > Unemployment is low, inflation has been far beyond 2%, so the goal is obvious. But isn’t the current inflation because they printed money out of thin air for nearly two years to push markets well beyond all times highs? Their methods feel more akin to filling up a dam’s holes with bubble gum rather than something more foundational. It seems like a lot of rubber banding. In my experience on the ground, all they’ve done is destabilize investments, prices, and inflation.
    • helen___keller 4y ago
      > But isn’t the current inflation because they printed money out of thin air for nearly two years to push markets well beyond all times highs? Essentially yes (although some amount of that is out of feds scope - see federal stimulus and PPP, decided by the legislative branch). At the beginning of the pandemic inflation was low (the fear was deflation) and unemployment was at extreme highs. > It seems like a lot of rubber banding. You aren’t wrong but the pandemic was a black swan event and society’s response to the pandemic was unprecedented (basically shutting down economic activity, some economic sectors like office real estate fundamentally altered to this day). I don’t think there was an easy way out and, all things considered, my opinion is the federal reserve (and lawmakers) did a pretty good job of keeping our economy from imploding. Let’s put it another way: the federal reserve is a control system, and that control system was pushed to the boundaries. Any good control system is going to get some rubber banding to recover from this scenario. The risk of runaway unemployment/deflation was too great in 2020, the risk of runaway inflation is too great now.
• ww520 4y ago
  That's part of their mandates.
• aksss 4y ago
  > "Molding the economy to their will" The thing to remember about central banking is that it's a relatively immature art, not science, and its practitioners are still refining the toolset. As a kid, I think one grows up just assuming they know what they're doing and that it's a pretty solid practice, but not so. You see them molding the economy to their will, but I see a bunch of people with gritted teeth and high blood pressure reactively trying to steer an out-of-control stagecoach whose horses are running at full tilt with their manes on fire down a country road with blind turns, giving it their all to keep it from crashing violently. They apply lessons learned but I think that every major economic event is still largely an experiment, and occasionally they still make the wrong moves leading to a need to apply harsh corrections. Give it another 100 years and maybe all the permutations will have been seen and the solution sets known, but it's a terribly complex beast, complicated by radically higher global entanglement in the prior 50 years. The question is, is it better than the alternatives. I think if expectations are realistically low, it is better to have some knobs and dials that you can monkey with to try and control speed and direction. Just my .02 (which is seemingly worth less each day).
  • kodyo 4y ago
    It's an unambiguously nauseating way to control the lives of billions of humans. We'd be much better off letting banks decide how much they value your deposits, and having a currency that politicians, bureaucrats and bankers can't manipulate. But alas.
    • ClumsyPilot 4y ago
      > having a currency that politicians, bureaucrats and bankers can't manipulate. Which is what, Gold? Bitcoin? Have you read the history of merchantilism and how Britiah and Dutch economic growth was restricted by supply of silver? The definition of a Fiat currency is that it can be manipulated by whoever is issuing it
      • kodyo 4y ago
        Probably Bitcoin. Gold would be fine if there weren't governments.
• rudyfink 4y ago
  Yes, here is a chart of their activity in setting the Federal Funds rate since the 1950s (https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS). It is only, in very recent years (from 2008 to 2015), that the rate has stayed unchanged for so long.
• deleted 4y ago
  [deleted]
• gorjusborg 4y ago
  I would say yes, but perhaps not as visible. Before the internet arrived and provided anyone to become an 'expert' in anything, it was still their job to manage the monetary system and employment. I'd say the issue now is that many popular haunts on the internet are designed to incite rage, and the Fed is always going to be unpopular when they have to cool things off in the economy.