http://www.oftwominds.com/blogaug13/taper8-13.html
Better to engineer a mini-crisis while you're still in control than let
a crisis you can't control run away from you.
One of the most widespread misconceptions about the Federal Reserve is that its
policies are based solely on economic data and models. This misconception is not
accidental but the result of carefully managed public relations: The Fed fosters
a public image of dispassionate experts working econometric magic that mere mortals
(i.e. non-PhDs in Economics) cannot possibly understand.
(Insert joke about one-armed economists being unable to say "on the other hand" here.)
The reality is the Fed is as much a political and PR machine as it is a financial
institution. Behind the carefully nurtured facade of experts poring over data
and complex financial models is a leadership that spends an inordinate amount of time
on PR and perception management (care to count the number of Fed-staged speaking
engagements and press conferences this year?).
The Fed is an intrinsically political entity, and its leadership is by necessity
thoroughly political. In public, the Fed leadership plays the part of dutiful technocrats
to perfection, but behind this mask they are keenly aware that the elected leadership
of the nation has relied on the Fed's easy money to enable stupendous deficit spending.
The Fed's mass money-creation and bond buying programs have allowed the elected leadership
(the Executive branch and Congress) to avoid any tough decisions; being able to borrow
trillions of dollars at near-zero real rates of interest means never having to face
difficult spending choices: need another trillion to fund politically powerful cartels?
No problem, just borrow it. The Fed has our back.
The Fed has a dual mandate, and no, it's not stable prices and employment.
The Fed's real dual mandate is:
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