What if the Fed Has Lost Control?

May 04, 2023

by Charles Hugh Smith Of Two Minds

When this bubble bursts, there will be no fourth or fifth bubble, there will only be rubble.

The US economy and its financial system operate under the implicit belief that the Federal Reserve controls the direction of the economy and finance. This belief isn’t in Fed influence, it’s in Fed control: the Fed can reverse a stock market decline on a dime, it can reverse a recession, it can do “whatever it takes” to keep markets stable and expansive.

The history of the past 30 years seems to support this belief. Every time a financial crisis has manifested, the Fed has “saved the day” with some new policy extreme, changing the rules, jacking up its balance sheet 10-fold, and so on.