The Federal Reserve: Masters Of The Universe Or Trapped Incompetents?

6 comments

Posted on 21st March 2014 by Administrator in Economy |Politics |Social Issues

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I vote evil incompetents who need to be executed as traitors.

 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Suppose the Fed was actually little more than a collection of incompetents trapped in a broken system that is beyond repair.

For a variety of reasons, the Federal Reserve is viewed by many as the financial Master of the Universe. Given how the media hangs on every pronouncement and the visible power of the Fed’s policies to move markets, this view is understandable.

But suppose rather than being masters of all things financial, the Fed was actually little more than a collection of incompetents trapped in a broken system that is beyond repair. Many reasons have been proposed to explain the Fed’s policies,and most (including my own expressed here) focus on the Fed’s need to protect the banking sector and the Status Quo, lest the whole rotten contraption collapses in a heap of worthless derivatives and various Ponzi schemes.

An alternative view is that the members of the Fed have been selected for incompetence by a system that fosters incompetence by its very nature, i.e. a centralized power center.

Longtime correspondent Harun I. recently offered this explanation of the incompetence of those atop the heap:

Regarding the competence of the Deep State and Federal Reserve:When one merges the Peter Principle and Pareto Principle one realizes that, not only are they incompetent, it is inevitable. Complexity does not equal competence. And because complexity is a form of leverage it does not require a majority of systems inoperable to fail.

Modern developed civilizations rest upon several inverted pyramids. How many people out of any random sampling know how to produce their own food, make their own clothing, build their shelter, or tap into their own water source? As complexity increases and the division in labor grows increasingly in areas that have nothing to do with core survival the civilization becomes increasingly incompetent.

Since a civilization is a hierarchal system, its leaders (the vital few) will eventually be incompetent. Inverted pyramids and inept leadership are a toxic mix. As history would indicate this situation eventually disintegrates then reorganizes… to be repeated.

Another key characteristic of such centralized systems is the way they trap participants, even those at the top. Analyst Catherine Austin Fitts has discussed this attribute, for example, in this interview: Catherine Austin Fitts on Wall Street’s Corruption, the Austrian School and Who’s ‘Really’ in Charge.

One way to think about this is to ask: let’s say the voting members of the Fed knew that the best way to re-start sustainable growth was to normalize interest rates by ending the Fed’s zero-interest rate policy (ZIRP) and quantitative easing.
Even if they knew these changes would ultimately profit the banking sector and the economy as a whole, could they withstand the pressure that would be exerted by everyone benefiting from the Status Quo?

I have long maintained that the Fed’s vaunted independence is actually contingent, i.e. the Fed is a political entity and as a result it responds to political pressure like any other political entity. And like any hierarchy, it is prone to group-think and the urge to conform to norms.

This raises another question: even if the voting members of the Fed wanted to fix the nation’s broken financial system, do they have the ability to do so?

I have posited that whatever consensus/group-think dominated the various factions that comprise the Deep State has eroded, and the cracks of profound disunity are opening between powerful factions in the Deep State.

Rather than Masters of the Universe, the Fed’s governors are increasingly looking more like deer caught in the headlights of a transformation they cannot understand, much less control.

Is the Deep State Fracturing into Disunity? (March 14, 2014)

Why Is Our Government (and Deep State) So Incompetent? (March 6, 2014)

The Fed Has Failed (and Will Continue to Fail), Part 1 (March 11, 2014)

How The Fed Has Failed America, Part 2 (March 12, 2014)

6 Comments
  1. harry p. says:

    and I 2nd admin’s vote

    21st March 2014 at 1:38 pm

  2. Anonymous says:

    admin, these comments you make about killing gso’s are a bit confusing.

    i know the cia often recruits university professors and what not, but serioulsy do you think anyone here, besides stuck, is going to ‘second’ that?

    21st March 2014 at 5:19 pm

  3. Administrator says:

    Anonymous

    Blow me and learn how to spell seriously, you dumbfuck.

    21st March 2014 at 5:38 pm

  4. Administrator says:

    Anonymous idiot thinks I’m a university professor. Yes, idiot. I’ve been recruited by SSS.

    21st March 2014 at 5:54 pm

  5. Administrator says:

    Fed “Fails” Stress Test, Releases Revised Results

    Submitted by Tyler Durden on 03/21/2014 16:17 -0400

    First the Fed screws up the “dots” – on one hand telling HFT algos not to worry about rate hikes, on the other saying the FF rate in 2016 will be a scroching 2.25%, then Yellen flubs the “6 month” statement sending stock into a tailspin and Hilsenrath and Liesman explaining in overdrive that she didn’t mean what she said, and now, we learn with the traditional Friday afternoon “shove under the carpet” bomb, that the Fed also flubbed its stress test results. Sounds about par for the world’s most powerful, and clueless, monetary institution.

    From the Fed:

    The Federal Reserve on Friday issued corrected results for the 2014 Dodd-Frank Act stress test. For 26 of the 30 firms, the correction led to either no change or at most a 0.1 percentage point change in the firms’ minimum, post-stress tier 1 common capital ratios in the severely adverse scenario. The change led to a 0.3 percentage point increase at two firms, a 0.2 percentage point decrease at one firm, and a 0.5 percentage point decline at another.

    The capital ratios were adjusted to address inconsistencies in the treatment of the fourth quarter 2013 actual capital actions and assumptions about preferred and employee compensation-related issuance over the course of the planning horizon.

    The attachment reflects the updated minimum tier 1 common capital ratios and the changes from the prior release. The Federal Reserve will reissue a full result paper on Monday with corrections as they affect all capital ratios.

    This is almost as sad, if entertaining, as the Treasury releasing a complete set of TIC data, then hours later admitting it had the goalseek formula set incorrectly, and revising the entire thing.

    For those who still care about anything the megalomaniacal, if somewhat confused, central planners at Marriner Eccles have to say, here are the revised results.

    21st March 2014 at 6:00 pm

  6. Westcoaster says:

    Pretty obvious to any observer that the Fed is dishing out heroin to the addicts with artificially low interest rates and Billions in their cash-for-crap program.
    Every market is rigged to the max and the market price of PM’s is seriously being depressed. One fine day it will all bust loose, and this crap with Russia will accelerate the process, IMHO.

    21st March 2014 at 8:01 pm

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