Re: Fed cuts rates 0.50 bps

From: Jeff Bone (
Date: Wed Apr 18 2001 - 16:59:00 PDT

Adam Rifkin wrote:

> Peter forwarded:
> > This is the fourth reduction in the federal funds rate since the
> > beginning of the year, and the second time the FOMC has announced an
> > inter-meeting rate cut.
> Remind me, who does The Fed work for?

Best-kept secret in politics: the Fed works for whoever is defined as "the
ascendant administrative interests." ;-)

> Isn't raising
> interest rates 150 basis points and then lowering them 200 basis points,
> all in the course of 13 months, just a tad excessive?

We gotta take a hard stand against the ooh-scary boogeyman, inflation. Even
when he doesn't exist. :-(

> It's almost like The Fed is panicking after making several stupid moves
> in a row last year.

The problem isn't that Feds are panicking about their own actions, it's that
they're panicking (have been panicking, did panic) because all of the
cherished econometric models that they base their decisions on stopped
working in an "overly-productive" high-velocity economy two-three years ago.
The velocity of money was too high, didn't jibe with the models. The only
solution to that is to cause a major recession / mild depression in order to
bring the real economy in line with the one predicted by the econometric
models, which have no place for increasing returns, network effects, or
productivity increases not based on tangible-good production-based metrics.
We're seeing a self-fulfilling prophecy played out in the large.

> Yeah, remind me: who does The Fed work for?

The transient / expedient answer is: right now, the Republicans. Those
bastards aren't comfortable with change anyway, so the Fed is working to
reverse it. (That, I believe, is really a statement of effect --- not cause
or purpose.)


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