Fed Report Shows Magical Thinking on Safety of Wall Street’s Banks | Hacker News Reader

Fed Report Shows Magical Thinking on Safety of Wall Street’s Banks

wallstreetonparade.com

18 pointscinquemb4 comments

Not sure if I trust this source, can anyone attest to the credibility of Wall Street On Parade? The site itself seems to have an almost accusatory tone baked in.

This article advocates for a very specific policy solution, so I wouldn't take this headline at face value.

That said, the Fed has signaled that it will intervene without limit to ensure the liquidity, if not the long-term solvency, of major banks. Long-term impacts of that position aside, the very premise of this article suggests that the banks are rock solid for the near term.

I find monetary policy a hard subject to reason about. It is too complex for me to understand. Yet the political economy of it is such that I would expect the expert classes to be corrupted in some way. Still, I just act like I believe the experts have it under control. The phrase "epistemic learned helplessness" comes to mind.

I've still got a lot of lit to read on the topic, but in terms of what it effectively manifests as, monetary policy seems to be some sort of bastard child of psychology and economics in the sense you hardly ever see the lever pulled until people start to lose faith in the system. There's probably some economic/fiscal buzzword for it, but that is the observation I've noticed just from reading on things.

The factor of just how much psychology plays into it, or at least "seems to, but doesn't", is what is most interesting to me.

Given J. P. Morgan's insistence that banking is first and foremost a business built firmly on its capacity to inspire trust, I can't really square the idea of monetary policy, its application, and its mechanism of action being entirely divorced from the collective psychology of the base participants in the economic system. Though I'm pretty sure I'll find some literature that suggests otherwise once I get looking.

Reply on news.ycombinator.com