Renowned economist Dr. Richard Hackney has released a new white paper praising the Federal Reserve for its “expert” manipulation of the stock market.
In recent years, the Federal Reserve’s easy monetary policies have come under increased scrutiny, and some have argued that have created an artificial boom that will lead to a disastrous collapse. Dr. Hackney says these skeptics have it completely backwards.
“At this point, an artificial boom is all we got,” Dr. Hackney told the DFP. “And frankly, it’s better this way.”
According to Dr. Hackney, in the old days, growth in the stock market–and in the overall economy to some degree–was dependent on real factors. Companies needed to develop products that consumers actually wanted in order to make a profit. Consumers needed to have enough savings and income to actually afford the companies’ offerings. The government needed to ensure that the expansion of destructive new policies was sufficiently slow to not get in the way. In Dr. Hackney’s telling, at least one of these requirements was always bound to fail, “Relying on real economic growth to grow the economy is just too risky.”
That’s why he is ecstatic to see the outsized role the Federal Reserve has taken on after the Great Recession. Now, instead of looking closely at the growth prospects of leading companies, their generally falling profits, or the surging corporate debt levels, Dr. Hackney said that investors look to the Fed, “Everything rises and falls based on the signalling of the Federal Reserve. And as long as Dr. Yellen says she sees a need for a ‘caution’ or that the Fed is willing to pursue ‘accommodative’ policies, it’s all good. Stocks will continue to go up. Janet’s a pro; we can count on her.”
Dr. Hackney also made a compelling argument on humanitarian grounds, “We’re talking about people’s retirement here. Why should someone’s nest egg get destroyed just because Apple decided to make a pair of bad Gothic earrings an integral part of its flagship product?”
Still, the skeptics remain. The Daily Face Palm reached out to one such economist, Paul Burton, at George Jefferson University to understand why they continue to deny economic science. Burton’s response was characteristically naive and simplistic:
“Markets only work if they’re responding to real information. If that information gets distorted, like when the Federal Reserve forces interest rates to be artificially low, then people make the wrong decisions. That’s how we get disasters like the Great Recession–years of distortion by the Federal Reserve ending in an inevitable collapse. There’s no reason to think it’s different this time.”
This kind of free market fundamentalism remains a fringe view however, with most academics and pundits focusing on Bush-era tax cuts, and the abolition of financial regulation in the 1990s as causes for the crisis.
In any case, Dr. Hackney’s response to the skeptics seems authoritative, “There will always be economic doomsayers out there. But all I know is that the Dow is near 19,000, and we’re in one of the longest bull markets in history. The Fed deserves credit not criticism. This time it really is different.”
Update: Note that all of the individuals quoted in this piece are fictional, and any similarities to the sentiments or names of real people are entirely coincidental.