RE: Federal Reserve Musings | The American Spectator | USA News and Politics
RE: Federal Reserve Musings
by

Quin, I would have to disagree with your suggestion that the Fed “send not one but two signals at its meetings, with those signals deliberately appearing to contradict each other.” The problem in doing that is that by creating excessive confusion in the market about what the Fed’s thinking is, you increase the likelihood that investors will make decisions based on wildly incorrect assumptions, creating panic, and massive volatility over time. Of all the things that Wall Street doesn’t like, uncertainty is at the top of the list. Investors like for things to be predictable, and all of the models that analysts use to help investors make decisions are based on limiting uncertainty, and it would make no sense, as a matter of policy, to deliberately introduce more uncertainty into the market. One of the great achievements of Alan Greenspan is that he ushered in an era of openness in the Fed, so that investors weren’t making decisions completely in the dark, and markets have been much more stable as a result. It would be a huge mistake to return to the old way of doing things, when comprehending Fed policy was a matter of guesswork.

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