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The Stock Market Is Selling the Fed's Independence Because ZIRP Broke the World
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- binarymax 1y agoI for the life of me cannot understand why everyone just rolls over. There is no fight. Media, CEOs, Lawmakers, there’s no protest and no pushback. It’s insanity.
- abnercoimbre 1y agoToo much to lose if you’ve accumulated a fair amount of wealth or power from the status quo. Who would expose their neck on moral grounds?
- softwaredoug 1y agoBecause of regulatory capture. The interests of the largest companies align with a government that over regulates and over taxes. It punishes their less sophisticated, smaller competition that can’t cope with the regulation and supply chain disruption. Meanwhile billionaires can call up Trump, flatter him, and ask for exceptions to policies. It’s good for them in the near term and absolutely sucks for the competiveness of the US economy longer term
- kelseyfrog 1y agoThey're on the same team. Stability is more profitable than chaos.
- bpt3 1y agoYou're right about stability, but we aren't experiencing stability in the long, medium, or short term so compliance or even support of Trump's policies make no sense. I assume megacorp executives think they'll be able to achieve regulatory capture to the point where they'll remain on top forever, but I don't agree with that conclusion.
- toss1 1y agoThe industrial leaders in Germany in the 1920s and 1930s also thought they could control Hitler, who was also rightly seen as incompetent. That did not work out well for them. Hubris is a heluva drug.
- binarymax 1y agoThis is chaos.
- mathiaspoint 1y agoFed independence has not been good for the working class to begin with. Good to see it going away.
- stego-tech 1y agoBecause those holding the levers of power saw the BLM protests and rising unionization efforts during COVID, and demanded mandatory RTO and AI investment to preserve their gains. I think most self-aware people know which way the pendulum is swinging, and the reason there’s “no fight” right now is because those of us who know what’s coming next are too busy protecting ourselves to organize protests again. We did Occupy Wall Street, we did XR, we did BLM and Gaza and anti-ICE, but those with their hands on the levers of power have made it abundantly clear that nothing will change until they’re dead, regardless of how many other people suffer and die before them. And so, we’re making sure they die first by prioritizing our present survival and taking targeted opportunities when they present themselves, rather than trying to organize a mass movement that most of our peers refuse to give a shit about because they can still make rent as a burrito taxi with three roommates, for now.
- jalapenod 1y agoWall Street loves BLM and critical race theory, they dredged up every divisive 1960s idea they could after OWS.
- stego-tech 1y agoFrom my perspective, they hate it. Police protect capital, and any movement that threatens police in turn threatens capital. CRT is just history, and the current holders of power are terrified at being held accountable for historical errors and choices, hence the opposition to it. Wall Street hates anything that breaks up or diversifies those at the top, and it’s why they were all too happy to embrace these on the surface when hiring was tight, and then throw them aside as soon as it was more profitable to do so. Trying to ascribe morality to capital is like anthropomorphizing your lounge chair, and also why I’m in the “no corps at Pride” camp: objects don’t have ethics.
- rjtavares 1y ago> President Donald Trump could only be birthed from a distorted world where borrowing is free and future cash flows are infinite. I don't really understand this causal link. Can someone enlighten me?
- ihsw 1y ago[dead]
- bpt3 1y agoThere isn't one. The entire article (as with nearly every one on that site) is a very long shitpost. That said, I do actually agree with the risks outlined in the article (if the Fed is no longer seen as independent, the global investment/financial system is likely to lose faith in the stability of the US dollar, which is likely to be a very bad thing) and I suspect the author and I share the same general opinion of Trump. However, the writing is almost unreadable because the author is trying too hard to be REALLY PISSED OFF at the right and edgy IMO, resulting in weird tangents like the one you pointed out.
- softwaredoug 1y agoI find it interesting the US has gone so long without trying centralized, state run economic policy. If you think about it, it aligns with a lot of populist movements around the world. I think we had the boogieman of the Soviet Union to create an elite consensus on how to manage the market, and now that seems old hat. So we will now experiment and likely suffer the consequences. It sucks Trump is singularly focused on the stock market. The market doesn’t really reflect the downside of a lack of Fed independence. Nor much of the downside of tariffs. Much of this economic policy stabilizes large companies, anligning them with the Govt, penalizing small/medium businesses. So of course the stock market will go up while the rest of the economy suffers. Billionaires have chosen to reign in hell rather than be fairly well off in heaven.
- bpt3 1y agoThe founding premise of the US is avoiding consolidation of power. There are many downsides to that (largely concerning waste due to duplication of efforts and other inefficiencies), but that's why it's never taken hold in the US. Hopefully we get a mild reminder of the severe downsides of centralized power and that's enough to get the country back on track.
- throwaway5752 1y agoHe's going to mortally wound the US economy, which was already precarious. The US is not competitive with China, absent the USD. The Federal Reserve is a foundational reason why the USD is the most important global currency for trade. There are nontrivial odds of Venezuela style outcomes for the US. The US media - particularly partisan mainstream conservative sources like FOX and CNBC - is drastically understating the damage this administration is to the US position in the global economic system. supporting evidence: https://www.yahoo.com/news/articles/south-korea-tells-china-wants-131240604.html https://www.yahoo.com/news/articles/south-korea-tells-china-...
- bpt3 1y ago> The US is not competitive with China, absent the USD. I'm sorry, but this is absurd. The US produces an enormous amount of goods and services, many of which are hard to replicate, and has a huge amount of natural resources available to it.
- paganel 1y agoFact of the matter is that organisations like the US Fed have too much unaccountable power, Trump or no Trump. It was only a matter of time before something like this was bound to happen, notice how no-one is out there in the streets protesting for the Fed's independence because not a single normal (voting) person cares about it.
- just-the-wrk 1y agoHow are those two claims coherent? They aren't obviously related
- pkoiralap 1y agoMy take on fed's unaccountable power is you can't and shouldn't do anything about it and keep it that way. Because if the fed does do a good job, the economy keeps floating just fine. On the contrary, if it doesn't, its just chaos and catastrophe, that benefits no one, including the fed. So in essence, the job is to prevent disaster. Personally, I think it is a super shitty job. Normal (voting) person is oblivious to both what the fed does and what will happen if the fed doesn't do it. All that a normal (voting) people care about, are numbers on price tags, and the fact that those numbers aren't as low as they used to be.
- righthand 1y agoBecause to the average person, Fed independence means affordable middle/lower class life. That is what people are protesting.
- markus_zhang 1y agoFed’s independence, IMO is only independent to political officials’ commands, but it still very much listen to some other elites e.g. the banking aristocrats. If those elites don’t give a fuck about the world, then Populism arises and tries to take them over. Exactly what’s happening right now.
- JumpCrisscross 1y ago> the banking aristocrats This...is not a thing. Banking hasn't been dominated by a hereditary class since the Great Depression.
- markus_zhang 1y agoJust loosely speaking. I’m not really talking about a family here. I’ll switch to “elites” then.
- JumpCrisscross 1y ago> not really talking about a family here. I’ll switch to “elites” then An interesting aspect of American central banking is that it doesn’t tend to cross-pollinate with commercial or investment banking. Bernanke went to MIT before a career in academia and government [1]. Yelled worked in government her whole career [2]. Powell, uniquely, worked in the private sector as an attorney and investment banker, but hasn’t been in that world for 15 years [3]. Until 2025, the Fed was legitimately independent of commercial banks’ concerns. Until Trump, Wall Street couldn’t pick its regulators the way it can now. [1] https://en.m.wikipedia.org/wiki/Ben_Bernanke https://en.m.wikipedia.org/wiki/Ben_Bernanke [2] https://en.m.wikipedia.org/wiki/Janet_Yellen https://en.m.wikipedia.org/wiki/Janet_Yellen [3] https://en.m.wikipedia.org/wiki/Jerome_Powell https://en.m.wikipedia.org/wiki/Jerome_Powell
- orwin 1y ago'Elites' (VCs and PE managers) very much disagree with the Fed's policies btw.
- aresant 1y agoThe real "genie is not going back in the bottle" moment is that both sides have decided that power - at any cost - is a valid strategy. And that's very apparent even in this article which leads with the logical fallacy of moral equivalence ". . . and America’s preeminent real estate fraudster who bankrupted six rigged businesses is all of a sudden concerned with supposed mortgage fraud" BOTH are guilty, BOTH are crooked! This directly leads to a lot of "the whole system is broken, may as well get mine"
- AnimalMuppet 1y agoMaybe both are guilty. One is guilty and trying to remove the other from office because of the other's guilt, though. That is, maybe both are guilty. Maybe both should be removed from office. But Trump's guilt (actual convictions, in fact) leave him no room for saying that someone should be removed from office on the basis of mere accusations.
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- mlinhares 1y agoThis boths sides stuff is such bullshit, we have armed goons disappearing people on the streets, there's only one side doing this. There were no armed goons disappearing people in the streets last year, it is very clear that both sides are not the same.
- NoMoreNicksLeft 1y ago>This boths sides stuff is such bullshit, we have armed goons disappearing people on the streets, When people used to say "disappearing people off the streets", they were trying to paint a picture out of Orwell's 1984, where the secret police not only drag someone off never to be seen again, but no one can or will acknowledge that they were ever born in the first place. When people today say "disappearing people off the streets", they mean illegal aliens are being detained to be deported to their home countries, but not actually deported because it takes forever for the court cases to slowly roll onward. But these same people also confused and hysterical why only rabid Democrats are alarmed by this.
- obblekk 1y agoThese critiques of zirp never explain what should have been done differently. It's very unlikely the Fed kept rates too low because inflation didn't exceed 2% for 12 years from 2008 to 2021. If the Fed had actually made money "too cheap" inflation would have kicked in much earlier. More likely, we made it very hard to do new stuff in the country, which made the value of borrowed money low. Congress spent decades adding regulations (often for good reason) that ultimately resulted in it being too expensive to do most things inside the US. If a business is banned from investing in most new things, it won't need to borrow more money. The Fed just responded to the market's appraisal of money value. You can even see this in the long term charts - interest rates declined almost continuously from 1984 to 2022. The entire time, inflation stayed at or below 2%. If the Fed had kept rates higher, theory would predict they would have caused a recession (and Scott Sumner has spent more than a decade arguing this is actually what caused the long deep recession of 2008 - money was too expensive, even at 0%). Ultimately money is neutral in the long run. The things that truly matter for growth are laws, culture, natural resources and education. These are the causes of our present social dysfunction. These are the issues we should focus on fixing. Not fiddling with interest rates.
- AnimalMuppet 1y agoIn fact, the Fed did try a time or two to get off the 0% rate in the decade after 2008. The economy reacted badly, so they backed off.
- altairprime 1y agoThe Fed could have instructed Congress to tax any growth in retained or dividended profits in excess of the annual Fed inflation target. ‘Pay more wages or charge less money’ is a direct lever over inflation, even after a partial reduction in overgrowth penalty tax is granted for research spending, and isn’t prone to causing deflation. Sadly, they don’t consider this lever in-scope for economic policy, and as far as I know they didn’t even try (and so Congress had no opportunity to consider, refuse, or ignore their request).
- yesfitz 1y agoDo you have an example of other times the Federal Reserve has lobbied Congress to adopt a policy? The closest I could find by searching "federal reserve asks congress" was Fed Chair Jerome Powell asking Congress to clarify the legality of marijuana[1]. I think the Fed's independence cuts both ways. They don't negotiate on fiscal policy, and the government doesn't negotiate on monetary policy (except they absolutely try to, obviously). 1: https://apnews.com/article/business-jerome-powell-congress-d2a82950a63ed5c52f166e3e3d7f9b1a https://apnews.com/article/business-jerome-powell-congress-d...
- just-the-wrk 1y agoI would like it if the NYT was willing to be this plain about the news. They have real journalists who do real work searching for the truth and lose our trust with the delivery. Its infuriating to watch Trump use the Cohn, Moses, and fascist playbook and watch the media pretend like his words are anything but a tool toward those ends. https://www.orwellfoundation.com/the-orwell-foundation/orwell/essays-and-other-works/politics-and-the-english-language/ https://www.orwellfoundation.com/the-orwell-foundation/orwel...
- Esophagus4 1y agoIronically, he was complaining about low interest rates before he was in office: https://x.com/realDonaldTrump/status/119492658963025920 https://x.com/realDonaldTrump/status/119492658963025920. But ideological consistency is, I guess, not his concern.
- xnx 1y agoHe is perfectly ideologically consistent to: He is never wrong, and is never his fault.
- AnimalMuppet 1y agoThe snark obscured the actual points. The interesting part, to me, was the disconnect between how the bond market and stock market are reacting. Can anyone predict how this is going to shake out?
- stego-tech 1y agoFlag it all you want, the writer is correct in their assertions. ZIRP was an acceptable solution to the problem faced at the time. Its detractors rightly pointed out all the harms that would come from it, especially if it was left in place longer than necessary - and they’re all essentially vindicated in hindsight. Still, it got us out of the immediate hole by kicking the various problems down the road a bit in the hope that regulators and Congress would fix the issues permanently in the long run. Obviously that didn’t happen, because when you give rich people and their asset managers free debt and government bailouts with no strings attached, they understandably don’t share the wealth (they wouldn’t be rich if they shared, after all). So the best we can do now is simply refuse to return to an era that exacerbated rampant speculation and irresponsible investing into burrito taxis, because we know the harms it will cause. I also appreciate the callout of the opposing sides that are the present stock and bond markets. Stock market boosters see no end to the good that comes from ZIRP because they don’t ever have to worry about the ten-year outcome when they hold a position for less than a decade; bond holders, on the other hand, absolutely have to worry about these outcomes, and we’re seeing their anxiety in sectors with outsized exposure to bond yields - like the insurance industry dropping customers and raising premiums to offset record property valuations in areas overly exposed to climate change and disaster risks. Viewed through that lens, and it’s the equivalent of a Doctor warning the patient that if they don’t start exercising and eating healthier today, they’ll be dead in a decade - and the patient figuring that’s tomorrow’s problem, then fucking off to McDonald’s for a large combo meal and a sundae.
- bpt3 1y agoPresumably it was flagged due to the inflammatory nature of the article and the inevitable political posts (like this one I'm now responding to!) that would result. For the record, the Fed did raise interest rates before COVID-era financial policy kicked inflation into high gear (this is the origins of Trump's ire for the Fed, because he generally wants to keep rates as low as possible while he's in office to juice economic growth), but backed off somewhat because the economy was not doing well and inflation was not the primary concern. Your doctor analogy does not seem to show much understanding of how the stock and bond markets work or the insurance sector works.