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IPFS News Link • Government

Meme Machine: Fed Idiocy Goes Unremarked


Federal Reserve: Credibility on the line ... Sam Fleming in Washington ... Last month's rate rise is drawing criticism. Some say it should abandon plans to increase again soon ... While economists are almost equally divided on whether Federal Reserve chair Janet Yellen will raise U.S. interest rates this week, the bond market suggests policy makers will wait. – Financial Times

Dominant Social Theme: The Fed will need to readdress the research that resulted in the 25 basis point rate hike. But it's totally understandable given the complexity of the decisions and the pressures of the job.

Free-Market Analysis: If you raised prices on a particular item and caused its entire market to collapse, you'd probably be fired.

But that is not what's happening to Janet Yellen. Instead, we're exposed to articles like this one in the Financial Times that go on and on – presumably with a soporific strategy.

The major media is obviously not enamored with mocking Ms. Yellen. The idea is that we ought to recognize that being the boss of the Fed is an extremely hard job. Yellen doesn't need our contempt; she needs our understanding.

The article is artfully written. Eventually we are supposed to lose track of its point and simply, vaguely recall that Yellen is "watching the markets closely."

It does begin with some criticism of Yellen's tepid hike, coming a few days before the market disasters. The first weeks of January were the worst EVER RECORDED. It made Yellen's decision to hike look, well ... idiotic – not that FT will use that word.

Stung by brutal declines in the S&P 500 index, some Wall Street investors are accusing the Fed of failing to appreciate the dangers brewing overseas. Instead of soothing the markets, US policymakers are accused of fraying nerves and exacerbating outflows from emerging markets by purportedly clinging to a strategy that envisages further increases this year.

"The market views tightening as a mistake now," says Jordi Visser, chief investment officer at Weiss Multi-Strategy Advisers. "I don't think 25 basis points matters much but the market clearly does. We're now closer to a recession than we all realise."

While this sort of reporting is at least realistic, the Financial Times can only keep it up for so long before returning to the kind of tone and descriptions that central banking always receives in mainstream media.

It is a respectful tone with ruefully analytical descriptions. Second-guessing of Fed decisions is an "occupational hazard," we learn. Ms. Yellen has received irate criticisms from the "political right" but also from "poorly positioned" hedge fund managers.

The article soon provides us with a retrospective, reminding us that Ms. Yellen was "initially praised for her handling of the rate rise." It came, by the way, "without a single voice of dissent."

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