Central Bank Creativity

After posting our own analysis of the Fed’s approach to liquidity issues, we found this article by Stephen Cecchetti.  Should you read this?

It all depends upon how you feel about the source.  If you think that someone who has a PhD from Berkeley, holds an endowed chair at a top school, served as a top staffer for the FOMC, and has held various top editorial positions for top economic journals should be disregarded — – do not follow the link!

If you believe that certain academics have insight — those who spent a lifetime studying specific economic and monetary crises, who served in key roles for policymakers, and who have analyzed data from a myriad of situations– then you might want to pay some attention to their opinions.

Regular readers will note that the analysis is entirely consistent with our own summary of economists.  Cecchetti does not draw an investment conclusion, but that is our job.  We are the investors’ guide to economic analysis.  Investors who think they can do better by following pundits who are non-economists should definitely look elsewhere.

Our Perspective

Let us be completely clear.  We have an eclectic approach.  Each of the many sources of information we follow, even those with whom we often disagree, tells us something useful.

Right now, nearly all market pundits are completely rejecting the top experts — people we see as the leading scholars in monetary policy.  These scholars are thinking carefully about the problems.

Investors should weigh their opinions carefully.  Few are doing so.