John Mauldin has an excellent article worth our attention.
Readers will want to read the article in its entirety; here are a couple favorite quotes to get started:
“It is important to remember that well past the middle of the last century the Federal Reserve concerned itself mainly with bank solvency, not interest rates. Greenspan was the first to realize that he could “juice” the markets and make everyone happy. It was the beginning of the current round of hubris.”
In other words, it wasn’t always this way. Fed chairs undoubtedly were aware of it long before Greenspan, but Greenspan was the first modern chair to run with it no holds barred (at least since 1920s NY Fed President Ben Strong thought it would be fun to toss the markets a little “coup de whiskey”). He also brought forth the questionable innovation of making a policy of announcing Fed funds rate targets, adding to his power by enlisting the aid of markets.
Mauldin quotes William Chancellor, from The Price of Time: The Real Story of Interest:
“On 7 April 2016, the current and former heads of the Federal Reserve were gathered at a meeting in New York City. During a panel discussion, the then head, Janet Yellen, was asked whether the United States was a bubble economy. Her response was discursive: she pointed to recent jobs growth and low inflation. In her view, the US economy was on a solid course. The Fed, Yellen said, was looking out for ‘clearly overvalued’ asset prices, strong credit growth, and reaching for yield—in other words, the financial conditions prevailing prior to the subprime crisis—but saw no reason for present concern. No, America’s top central banker was adamant, the United States was not a bubble economy. To her side, the oldest surviving Fed Chairman, Paul Volcker, pulled out a handkerchief and loudly blew his nose.”
Again vividly highlighting how far the Fed had sank since the end of the Volcker era. These perspectives are all worth keeping firmly in mind as media economists cast about for causes of 2020s economic and financial strife.