Fed Watching

To my mind the two most significant paragraphs in John Tamny’s post at RCM on why the Fed won’t solve our economic problems are these:

Rather than judge companies on their individual merits, investors must waste valuable time playing junior Kremlinologist in order to divine the future actions of the second rate economists who populate the Federal Reserve. Investors aren’t doing this because our central bankers have any useful knowledge to impart, but because what should be a low-entropy monetary input has become a high-entropy, bull-in-the-China-shop distortion whose actions must be priced.

Far from a driver of positive economic evolution, a Fed that we all have our eyes on has become an economy-shrinking distraction that forces us to consider the macro over the all-important micro. Instead of focusing all of our attention on commercial ideas not yet hatched but that need investment, on existing companies that simply need new direction, not to mention healthy companies that would grow even larger and healthier if entrusted with more funds, investors must, in the words of George Gilder, spend inordinate amounts of time so that they can “predict the exercise of government power” over predicting which technology highflyer will become the next Apple, or which corporation is best suited to cure cancer.

How can the economy grow robustly without federal, state, and local governments making better choices, CEOs being held to higher standards, without our producing more of what we consume, and limiting our consumption (in the instances of healthcare, the military, and education just to name a few) to what we can pay for? The Federal Reserve is enormously influential but I don’t think even it can make that happen.