Saturday, June 27, 2015

Greece, the EU and the Power of Fiat Currency

Greece is evidently going to hit the financial skids next week.  The EU appears to have stopped bargaining (as have the Greeks, who now want to put the issue of austerity in exchange for another EU bailout to their voters).  Without bargaining, there won't be a deal.

How did things end up this way?  One perspective is that, by entering the Euro Zone, Greece gave up a lot of power and put itself under the control of the EU.  When a country issues its own currency (i.e., fiat currency), it has considerable control over its currency's value in relation to other currencies.  If the country slides downhill economically speaking, it can devalue its currency and export its way out of trouble.  The Japanese have done this for decades, and the Chinese and other developing nations are endeavoring to emulate the Japanese. 

But what if the country, instead of issuing its own currency, uses another medium of exchange?  Historically, gold and silver, and sometimes copper, served such a role.  But a country that uses an independent medium of exchange can't devalue its way out of a recession.  It has to find another way; and sometimes it can't.  That's why the industrialized West moved off the gold standard in the 20th Century.  It prevented them from using central bank policies to recover from economic downturns.

Fiat currencies have a very bad image among many in the political right.  Gold standard conservatives fear that governments will inflate the wealth of citizens away for reasons of political expediency.  They rightly point to the morass of post-World War I Germany, when the Weimar Republic did that, resulting in widespread malaise and paving the way for fascism. 

But gold standard adherents forget a basic principle of economics:  goods become widespread in the market because people demand them.  Fiat currency is simply another good, and people demand a lot of it.  It serves as a medium of exchange, and no major economy can exist without a copious supply of the medium of exchange.  Gold was extremely scarce in Colonial America, and deer skins (i.e., buck skins, from whence came the term "buck"), tobacco and other goods served as an alternative to gold.  Various commercial promises to pay, such as drafts, promissory notes, banker's notes, and the like, also came to be used in lieu of gold.  Fiat currency was government's way of simplifying the problem of lack of gold and silver that could be used as media of exchange.

Fiat currency also conferred power. When the American Revolution began, the Continental Congress issued paper money in order to finance the rebellion.   This paper was subject to inflation, and considerable controversy eventually surrounded its use.  Nevertheless, the Continental Congress' ability to issue fiat currency helped to sustain the Revolution.

The U.S. government in the 19th Century outlawed the issuance of bank notes and other private currency and substituted the greenback in their stead.  Although the U.S. government clung to the gold standard, it devalued the dollar against gold once the Great Depression began, and took the dollar off the gold standard during the economic difficulties of the early 1970's.  In other words, gold wasn't really the standard.  The dollar was worth what the government said it was worth, not what the market price of gold happened to be.

The power of fiat currency became vividly clear during the Great Depression and World War II.  The U.S. government began to borrow in large amounts (i.e., engage in deficit spending) in order to alleviate the Depression.  Then, it borrowed enormous amounts to finance the war and defeat fascism.  After World War II, the U.S. government flooded the free world with dollars, so that there would be a currency to replace the British pound as the world's reserve currency.  The U.S. government derives enormous power from the fact that the dollar is the world's reserve currency.  People in other countries have to pay attention to America, because America's currency keeps the world's economy going.  Even in the Communist bloc, the dollar mattered.  As Communist economies flagged, the dollar became the underground, but de facto real, currency in many Communist nations.  Communism's legitimacy was in part undermined by the strength of America's fiat currency.

Greece is in a real fix, because its citizens don't want austerity, but they want to remain part of the EU.  Reality is that they are damned if they do and damned if they don't.  Staying in the EU will require agreement to the EU's demands for more austerity, which will probably worsen Greece's depression.  Leaving the EU will also likely mean that the Greek depression will worsen.  Who's at fault for this mess is a complicated question, but the answer, in short, is like Agatha Christy's novel, Murder on the Orient Express.  Everyone involved in and with the EU is responsible.  And there's no easy way out of the mess, for anyone.

But a larger point is that fiat currencies aren't good or evil.  They are a tool, one that can be used productively or counter-productively.  We need to watch what the Fed is doing--closely.  But let us recognize that much of America's strength comes from its fiat currency. 

Friday, June 19, 2015

An Epidemic of Price Fixing in the Financial Markets

Nothing is more antithetical to the principles of free enterprise than price fixing.  Rigged prices undermine the efficient functioning of markets and defeat their ability to maximize economic welfare.  Sadly, we've had an epidemic of price fixing in the financial markets, frequently involving the largest and most important banks.

The London Interbank Offered Rate has been the subject of governmental investigations in Europe and the U.S. for alleged years-long collusion. Billions of dollars of fines, penalties and other payments have been assessed on various big banks, and the investigation of other major banks continues.  Trillions of dollars of loans and contracts were priced based on Libor, and the potential impact of this price fixing is massive.

Foreign exchange rates have been investigated for rigged prices, and billions of dollars of fines, penalties, etc. have been paid in government and private civil lawsuits.  Again, some of the largest banks are implicated.

Now, word comes that the market for interest rate swaps has been under investigation for price fixing via the alleged collusive manipulation of the ISDAfix, a benchmark swap rate that is used in the pricing of a variety of financial products.  The interest rate swaps market, although obscure to the general public, involves hundreds of trillions of dollars of financial products (in notional value) sold to corporations and other commercial customers to offset interest rate risk.  Big banks are reportedly involved this collusion and the fines, penalties, etc. could total perhaps billions.

There are also reports of investigations of price manipulation by big banks in the metals markets.  These might involve restricting supply and other maneuvers to rig prices.  If wrongdoing is uncovered, more large fines, penalties, etc, can be expected.

Many of the banks involved in these matters are likely to be too big to fail.  In other words, while conspiring against the public in very large and important markets, these banks enjoyed the explicit and/or implicit backing of the taxpayers.  This backing helped them attain Brobdingnagian size, which in turn probably facilitated their ability to rig markets. 

The financial markets are the central venue of the capitalist system, being the place where holders of capital and borrowers of capital meet to determine the allocation of society's financial resources.  The largest banks are at the center of the financial markets, and their conduct ripples through the financial markets and the entire free enterprise system.  That such crucially important players are so regularly conspiring against the public and the public interest presents a galling spectacle that damages the credibility of the capitalist system.  Are markets truly socially beneficial or are they simply a means by which the rich and powerful fleece others? 

The world's largest banks have the legal and social responsibility to refrain from such reprehensible conduct.  However, their sad record of massive, multi-market price fixing seems to tell us that their chances of upholding these responsibilities aren't very high.  Their collusive activities often arise in markets that have a bi-level structure:  an inner inter-dealer market where the big banks and other financial firms trade among themselves, and an outer market where the dealers trade with the public at usually marked up prices.  The inside inter-dealer market is a perfect venue for price-fixing, as the dealers have to talk and trade with each other every business day.  As Adam Smith put it in The Wealth of Nations, "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or some contrivance to raise prices."

Thus, the challenge falls on regulators and law enforcement authorities to be vigilant and firm.  The sheer magnitude of the wrongdoing, as demonstrated by the billions that have been paid out to date, is astonishing.  Those who may seem paranoid about the financial markets have it right--way too often, the markets are rigged.

Wednesday, June 3, 2015

How To Beat ISIS

It's clear that conventional warfare won't beat ISIS.  The Iraqi Army is a joke, and not a very funny one.  Whatever it does, it doesn't fight.  The Shiite militias in Iraq can't be expected to succeed in the mostly Sunni areas of Iraq now controlled by ISIS,  because they present too much risk of sectarian conflict.  The U.S. isn't going to send in ground troops to fight for the Baghdad regime (nor should it).  The Kurds, like the Shiites, can't effectively take and hold Sunni majority areas.  So how to beat ISIS?

Stop fighting World War II.  There isn't a conventional force available that can realistically be expected to beat ISIS, and probably won't be one for the foreseeable future.  Instead, hoist the Islamic insurgents on their own petard.  Sponsor insurgency against ISIS.

The problem ISIS has is that it is trying to establish a caliphate--an actual country representing the promised land of ISIS's ideology.  ISIS doesn't merely conquer.  It endeavors to establish governments, social order and a functioning economy.  If it succeeds at nation building, its legitimacy will be heightened. 

The United States, although the most powerful nation in the world, is in the uncomfortable position of being weaker in Iraq and Syria than ISIS.  Time to take a page from insurgents going back to Ho Chi Minh and Mao Tse-Tung.  When you're weak, go asymmetric.  America doesn't have armored columns to roll into ISIS-land.  The armor was surrendered by the Iraqi Army to ISIS.  Giving the Iraqis more conventional weapons may turn out to be provisioning ISIS even more.  Remember that to this day, Iran flies American F-14 and F-4 fighter-bombers. 

Instead, America should foment rebellion against ISIS.  This would be rebellion by the Sunni population in the areas where ISIS governs.  ISIS imposes a very harsh, medieval form of Islam, complete with diverse and sundry outrages such as televised beheadings, burnings, shootings, and so on.  As time passes, more and more of the population under ISIS's heel will likely harbor desires to turn their Kalashnikovs on their draconian overlords. Organized nations provide easy targets for insurgencies, since governments have to operate openly.  Their facilities, personnel and infrastructure can all be attacked.  ISIS would expend substantial resources trying to defend itself internally, leaving fewer resources for further territorial aggresion.  Predictably, ISIS would respond to insurrection harshly, and that in turn would harden hearts and minds among the oppressed.  The rebellion would continue apace.

Of course, American-supplied weapons for such an insurgency could some day be turned against America.  That was a problem in Afghanistan, when the CIA helped to arm and train Afghan rebels fighting the Soviet occupation.  But would we be better off with a Soviet/Russian controlled Afghanistan today?  What would a guy like Vlad the Invader (you know, that Putin fellow) do if he had Afghanistan as a launching pad for further territorial aggression?

We have no effective conventional options in Iraq.  Let's go unconventional.  Let's go asymmetric.

Sunday, May 24, 2015

A Winning Strategy for the 2016 Presidential Election

Be unscripted.  That's the way to win the Presidential election in 2016.  The American people are looking for an authentic, sincere, unscripted candidate they can, for the most part, agree with.  Someone who speaks from the heart, and empathizes and sympathizes with them.  Someone they can sit down and have a beer with.  Not that they need to agree with everything the candidate advocates.  You can disagree with your friends and still like them.  But you can't be friends with a phony.

Unfortunately, scripting is what modern politics is all about.  Data-driven, Internet-interfaced, bet-hedged down to the last precinct, today's politics is a game of angles, maneuver and percentages.  There is a lot of well-deserved publicity about money in politics. But the money has to be spent wisely.  As Mitt Romney demonstrated in 2012, simply having a lot of money doesn't win the election.  It's important to appear genuine.  Mitt couldn't pull that off when it came to hunting or being a right wing maniac (a prerequsite for bringing the far right to the polls).  He is basically a moderate who tried to pose as a conservative and came across as implausible.  That cost him the election.

The political cognoscenti understand the importance of appearances.  Armies of political scriptwriters are furiously working on scripts for how to appear unscripted.  Candidates are making appearances in very small towns in Iowa with real people, as in folks who might drive nine-year old cars because they can't afford anything better.  Candidates appear in shirtsleeves and eat ethnic food, preferably the kind that's not healthy so that you don't appear preachy about diet. 

But the electorate isn't fooled.  Hillary Clinton seems to have used her financial war chest to scare off serious primary challengers.  But she's so heavily scripted she's having trouble generating enthusiasm outside her longtime coterie of loyalists. Jeb Bush was against the invasion of Iraq, then he was for it, then, last we heard, he was against it.  At this rate, he won't have a chance even with the ardent support of the Republican establishment.  There are genuine, sincere wackos on the far left and far right.  But the general election won't be won by a mouth-foamer.  It will be won by a charismatic, empathetic, reasonable candidate who captures the public's imagination.  And that candidate will . . .  uh . . . perhaps . . . um . . . arrive with Godot.

Wednesday, May 20, 2015

Planning For Your Obsolescence

The ongoing debate over trade policy highlights a major career risk:  the possibility that you could become obsolescent because of cheaper labor elsewhere and/or automation.  For example, in the auto industry, many car parts and some cars are made in other countries and shipped to America because labor and other costs are cheaper elsewhere.  In America's auto assembly plants, robots have replaced large numbers of people because robots are more reliable and cheaper.  This trend will continue as many other tasks become mechanized and/or cost-effective in lower wage nations.  Computer programming, radiology, legal research and legal document review have joined data entry and call center jobs as routinized work that can be done by smart people living in many countries.  What can you do about your potential obsolescence?

Keep up your skills.  Maintain and upgrade your professional skills.  People capable of cutting edge work will often have an advantage over foreign competition and robots.

Be flexible.  Keep an open mind about working in new and different jobs.  Many people have succeeded in fields they didn't plan on entering.  But they were open minded about learning new things and taking on new challenges.  The economy will keep changing, and success can follow if you change with it.  If you're unemployed, be open to taking temporary and part-time work in order to prevent your personal finances from eroding faster than necessary.

Computers and computer science.  Much of the reason for personal obsolescence is computerization.  Computers and related technologies (most importantly, the Internet) make it possible for workers overseas and robots to compete against American workers.  Don't get angry about this because computerization will continue--and most likely at an accelerating pace.  If you can't beat them, join them.  Acquire and maintain computer skills.  Go into a computer-related field.  Become a programmer, technician, data management engineer or something else computer-related that fits your skills.  Computers won't become obsolete, and people who can work with them have a better chance of staying employable.

Build your benefits.  Work as long as possible to build Social Security credits.  If you have the potential to earn a pension, stay in that job long enough to qualify.  Having a stream of payments that doesn't depend on your employability is a major victory over obsolescence.

Save.  Here's an ugly truth:  just as the wages and salaries of the middle class have fallen due to globalization and other reasons, the returns on capital have improved.  People who hold capital are becoming comparatively better off, while people who work are on average becoming comparatively worse off.  Save. Acquire capital and improve your chances for a comfortable life.  Then save some more.  Whatever your views on social issues like the distribution of income and wealth, you are individually better off with a pool of savings to protect you from the riptides of a free enterprise economy.

Sunday, May 17, 2015

Obama's Irrelevance

Barack Obama is becoming irrelevant.  With a Republican-controlled Congress, he cannot implement much of his agenda.  When he tries, he has to ally himself with the Republicans, as he recently did on trade policy.  The result was to aggravate the Democrats in Congress, who used the moment to extract concessions of their own.  Now, the Republicans don't like Obama, because he's a Democrat.  The Democrats don't like Obama, because he's not really a Democrat.  And Obama finds himself without any real friends in Washington.  Not that anyone has real friends in Washington, except maybe their dogs.  

ISIS does its best to give the President opportunities to shine.  With every atrocity, the extremists provide another excuse to drop a smart bomb or authorize a Special Ops raid on the hideaway of some senior nasty guy.  But in the war against terrorism, there is no Omaha Beach, no Bastogne, no bridge at Remagen, no unconditional surrender.  And there won't be much opportunity for a President to build a lasting legacy. 

The President would like very much to pivot toward Asia.  And smaller Asian nations, watching China literally construct territory in the South China Sea, would like America to swivel their way.  But the increasing chaos of the Middle East keeps sucking the President into its vortex.  He dreams of detente with Iran, seemingly unaware that making nice nice with the ayatollahs will probably increase the desire of Saudi and Gulf State Sunnis to support Sunni insurgents in Iraq and Syria (possibly including ISIS) in order to counterbalance growing Iranian power.  A gain in stability could be met with an increase in instability.

But even as Obama recedes into the background, the Republicans can take no comfort.  They will achieve little in Washington without control of the White House.  And they're bogged down by a mosh pit full of Presidential hopefuls, none of whom have captivated the electorate.  Perhaps they, too, are fading into irrelevance.

Thursday, May 7, 2015

The Zen of Investing

How do you allocate your investment funds in times like these?  Stocks bound upwards for a couple of days when statistical data indicates the economy is slowing or a Fed governor smiles.  Then, the market nose dives crazily the next couple of days when oil prices rise or unemployment falls or another Fed governor frowns.  Bonds slump and then surge, or surge and then slump when inflation expectations rise or fall.  One constant in the financial markets is volatility.  Another is unpredictability.  And a third is no net gains--as in, for all the hysteria, stocks have hardly done squat this year.

The financial media is full of conflicting predictions--the market will boom, the market will crash--and conflicting advice--buy this, sell that, short the world and stock up on survivalist gear.  To paraphrase former Fed Chairman Ben Bernanke, things are unusually uncertain.

At times like this, the best option may be to step back from the chaos and cleanse your mind of desire.  At least, of desire for short term gains and avoidance of losses.  It's impossible to make money all the time, or to avoid all loss.  With entropy seemingly on the increase, any effort to make every day a good market day will have you believing six impossible things before breakfast and doing battle with windmills.

There's nothing wrong with holding cash, maybe even a lot of it.  Cash is beautiful.  A goodly amount in a federally insured bank account or U.S. Treasury debt promotes equanimity and sound sleep.  You will smile more.  There may be some who would argue that a fully invested, well-diversified, periodically rebalanced portfolio will provide better returns than a partially invested portfolio with a lot of cash.  This may be true in theory, but an awful lot of investors don't have the nerve to stay the course with a fully invested portfolio through the periodic mania of the markets.  They sell and freeze up, never again to invest, and potentially lose a great deal of future gains.  All the nice theory in the world doesn't amount to diddly if you're too stressed to implement the theory.  To maximize returns in real life, you have to be calm and unemotional.  And if doing that takes having bundle of greenbacks under the mattress, then so be it.  Don't feel the need to allocate every last dollar to something or other right away.  Hold off on betting your last buck until you feel comfortable.  Be zen, and increase your chances of becoming rich.

Tuesday, April 14, 2015

Is the Federal Reserve Wrecking Retirement?

We're now in the 7th year of Federal Reserve induced ultra low interest rates.  The Fed has kept short term rates at zero (actually negative, once you take inflation into account) through monetary policy.  Long term rates fell as well, especially after the Fed devoted years to quantitative easing (i.e., purchasing bonds in the open market).  Those people old-fashioned enough to actually save money have been bedeviled by the near-absence of interest income.  While some have been desperate enough to gamble with risky investments like junk bonds in order to generate more income, many and perhaps most have simply tightened their belts and spent less.  After all, if you're not getting any interest income, the last thing you want to do is spend down your principal.  That's like eating the seed corn--there will be no more harvests once the seed corn is gone.

Insidiously, the years-long pandemic of low long term interest rates has undermined retirements.  Pension funds, insurance companies and other persons and entities trying to provide for America's retirees have historically depended on long term bonds to provide a stable source of predictable income.  Pensions funds, insurance companies offering annuities, and other providers of retirement income tend to have relatively predictable obligations (i.e., the payouts they must make to current and future retirees), and look for predictable sources of funding to ensure that they can meet their obligations.  U.S. Treasury securities, agency bonds and high quality corporates were the bread and butter of retirement funding.  But these same stable long term investments have since the 2008 financial crisis been paying lower and lower interest rates. It's getting harder and harder to finance defined benefits.  While pension funds, insurance companies, municipalities and the like have sometimes turned to stocks and alternative investments, the volatility of these alternatives makes them a poor substitute for the plain vanilla fixed-rate, meat-and-potatoes high quality bond.

Of course, pension providers could contribute more funding to pension plans to make up for the shortfall in interest income.  But how many corporations, states and municipalities do you see leading the charge to put extra profits or taxpayer dollars into pension plans?  Many seem to be looking for spots on the increasing crowded sides of the road to dump current and future pensioners.

Corporations have curtailed and terminated defined benefit pension plans.  States and municipalities are in the process of doing the same.  Multi-employer pension plans are going belly up like fish in a toxic waste spill.  Soon, almost all of America's workers will be left with largely self-funded defined-contribution retirement plans, like the 401(k), or with self-funded retirements using IRAs.  Experience teaches that self-funded retirements are usually not as stable or comfortable as retirements funded with defined benefit pensions.  And that's just for the 40% of Americans who have any retirement savings at all.  As for the 60% who have none (as in zero, zilch, nada), the opulence of life on Social Security beckons. 

To be sure, Fed policy isn't the only reason why interest rates are low.  Economic and political instability in many other parts of the world are driving capital into safe dollar-denominated investments.  Low inflation tends to keep interest rates low.  But the Fed, as the single most powerful force in the money markets, has played a crucial role in eradicating high long term rates.

While Wall Street, corporate America, the 1% and many of the unemployed have benefited to varying degrees from the Fed's suppression of positive interest rates, there is, as economics teaches, no free lunch. There are costs to persistently low interest rates, and much of the cost has fallen on those middle and modest income workers who have or hoped for a defined benefit retirement.  Okay, so we already know the wealthy enjoy a heads-we-win, tails-those-little-people-lose advantage.  But we shouldn't buy into the Fed's story that it's creating stability to prevent a Great Depression.  What the Fed has done is transfer losses and instability that could have manifested themselves in another Great Depression, to many of America's current and future retirees, whose golden years may now be more unpredictable and depressed than they had hoped. 

Thursday, April 2, 2015

The Low Euro: Greece's Salvation?

Greece is within a few weeks of running out of money to pay its debts.  Default looms, and it could cause financial disruption in Europe and around the world.  Yet the Greek government and the Euro bloc are at loggerheads in an Alphonse-and-Gaston routine where true compromise is as commonplace as hen's teeth.  Sounds like Congress.  Meanwhile, the rest of us wait for Godot. 

Luck, however, is part of life, and both Greece and the EU are very lucky.  In its current state of economic extremis (and Greece is suffering the equivalent of the U.S. Great Depression of the 1930s),  Greece would want to depreciate its currency.  If it could do so, depreciation would make its export businesses more competitive and bring in tourism.  But Greece, being part of the Euro bloc, has no control over its currency.  The European Central Bank calls the shots for the Euro. 

Serendipity would have it that the ECB decided recently to engage in quantitative easing (i.e., the buying of Euro-denominated bonds in the open market) as a way to stimulate the EU's stagnant economy.  Quantitative easing is one way of printing money, and the Euro has fallen by about 25% as a consequence.  A 25% price move is an elephantine move in the currency markets, and changes all kinds of economic relationships.  European exports just got gussied up in a big way, and European tourism is now a bargain compared to a year ago. 

Greece doesn't export a lot outside of Europe, but it is one heck of a tourist destination.  If given some time, Greece's tourist business will probably pick up.  Some of Greece's exports might be shifted to non-Euro bloc nations.  Greece might have a shot at recovery.

Much of the problem is that neither the EU nor the Greek government trust each other.  Definitive resolution is impossible without trust.  The result has been a steady kicking of the can down the road every time Greece and the EU have to negotiate.  This time, however, if they kick the can down the road (which is one possible outcome of the current impasse), the consequence may be positive.  If Greece has a couple of years to turn itself around using the low Euro, it may have a shot at recovering enough to satisfy the EU's debt collectors.  But will the EU and Greece muddle through one more set of negotiations?  If everyone were rational, they might pull it off.  But then again, if everyone were rational, they wouldn't be in the mess they are now in.

Thursday, March 19, 2015

How the Fed Told the Market What It Wanted to Hear

One of the most human things about humans is that they tend to hear what they want.  It's easy to take advantage of this trait. Politicians do it as a matter of course.  Many, and perhaps most, Congressional districts are gerrymandered to favor one party or the other, so that members of Congress can be elected, and then endlessly re-elected, simply for saying what their constituents want to hear.  Our gridlocked government doesn't actually do anything.  We pay members of Congress nice salaries simply to say what we want to hear--and in the final analysis the shame is on us.

Government officials aren't above telling us what we want to hear, either.  The Fed's latest policy statement is a good example.  The word "patient" was removed, indicating that there wouldn't necessarily be much warning of an interest rate hike.  This is hawkish. 

But the statement also tried to make nice-nice with all the skittish investors out there who bet on continued money printing by saying that a rate increase in April is unlikely, and that the timing of future rate increases would be dependent on economic data.  The Fed also continued from the previous statement to say that it anticipated moderate economic growth, lower than average inflation in the near term and a continuation of its practice of re-investing principal payments from its holdings of federal agency and Treasury securities into other agency and Treasury securities (thereby maintaining the size of its balance sheet).  These dovish statements softened expectations for rate hikes in the near future.

The market rallied yesterday (Wednesday, March 18, 2015), with the Dow Jones Industrial Average rising almost 230 points (more than 1%).  Today, the Dow dropped 117 points, or 0.65% (although the Nasdaq rose 0.2%).  What gives?  The market initially read the Fed statement to be dovish and drank deeply of the punch bowl.  But Fed Chair Janet Yellen also has made clear that there are no assurances as to June and a rate increase in June is possible.  The market evident sobered up today and took some money off the table.  The Fed statement didn't change from yesterday to today.  What changed was how the market read the statement.

The Fed is now in the position it wants to be in--it can move rates without giving a lot of notice.  It has much more flexibility to react to changes in economic data.  Investors who are caught leaning the wrong way can't expect a bailout.  We're back to the past, to the Fed of the 1970s, 80s and 90s, which tended to be opaque and liked it that way.  It had room to move.  For example, in 1994, the Fed decided to raise rates, when large swaths of the market didn't expect a rate increase.  Many hedge funds and other investors were seriously discombobulated, but there was no money printing done to make the boo boo go away.  All the losers could do was to reflect on how there's a certain amount of rancid cheese in life and you just have to deal with it.

Now, let the investor beware.