'The Fed's Increasingly Grandiose Role'

George Will has noted, the curious journalistic acceptance of the Fed's increased powers "...semantic infiltration of journalism by language that ratifies the Fed's increasingly grandiose role. A Financial Times column on Yellen, now Bernanke's presumptive successor, described her as "poised to take the tiller of the US economy." Oh? The economy has a tiller? And with it the Fed chairman can steer the economy? Who knew?" Free markets with tillers. Interesting concept, and it has been cleverly and stealthily slipped passed the goal line. 

Nothing in the Fed's mandate directs the Fed to "tiller" the economy. Its new powers are a result of confiscatory creep. Stock market going up, all good. Gone, or ignored, is any language that encourages savings, defends the value of the dollar, or, as mentioned in its mission statement, provides "moderate" interest rates.

 Will continues. "A touch on the tiller here, a nimble reversal there -- these express the fatal conceit of an institution that considers itself capable of, and responsible for, fine-tuning the nation's $15.7 trillion economy." Add in the planted comment here by the regional Fed chair, and then the counter-comment there, and we have management via choreographed press releases. Just like a helicopter parent never leaves the child, the Fed of late never leaves the markets alone. Pledged now to "iron out" the cycles, it also seems geared to guarantee robust stock returns each year. All aboard for the historically low bond and dividend yields. What could go wrong?


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