The Joke's on us, and Federal Reserve Jokers Are Not So Funny
David Haggith

It's inside humor.

We start off by looking at an old funny joke told by Alan Greenspan (except that few of us would perceive it as funny at all, though the Federal reserve’s Federal Open Market Committee members, who set monetary policy, found it quite funny as an inside joke):

...we can reach price stability either by driving down the inflation rate and getting productivity to bounce up or by revising down the inflation figures and producing higher productivity! [Laughter] -Alan Greenspan, July 1996 FOMC Minutes

Inflation has been revised down for a long time, even though the Fed has has designed inflation into its plans for as long as it has been creating money. Judy Shelton explains why below (see boldface headline). She also reveals how the Fed knew from the beginning that “price stability” never meant 2% inflation. The reason for the Fed’s target inflation rate of 2% is not a funny deception at all, but intentional deception it was.

Now that the Fed’s planned inflation ran far out of control above the Fed’s target (in a purely transitory way, of course, so long as you measure “transitory” with a long enough timeline), it’s no wonder that we’ll also all get to suffer the crash the Fed has engineered by creating monstrous asset inflation bubbles in everything big that’s starting to fall. It’s no wonder that …

[a] crash is coming, and it may be terrific. …. The vicious circle will get in full swing and the result will be a serious business depression. There may be a stampede for selling which will exceed anything that the Stock Exchange has ever witnessed. Wise are those investors who now get out of debt.

While that was said by Roger Babson at a speech at the Annual Business Conference in Massachusetts on 5th September, 1929, I suspect he would be saying something similar today as things crack under the Fed’s tightening. 

“Oh,” you say, “But the Fed is now loosening.”

True, but just a reminder: Even the Fed says its monetary policy can take as long as a year to affect the economy. There is a lag. The cracks are still building from the old tightening. On top of that, the return of inflation that is now being acknowledged more and more to where the Fed may eventually have to admit inflation has returned—just as it eventually had to do after the first three months of this year—may mean a reversal of the recent reversal in Fed policy. That’ll be another laugh that’s not so funny where the joke of thinking we were in for a soft landing is on them (but dripping all over us … like we were standing too close to the manure pile when the semi ran into it).

On Friday, I’ll start composing my Deeper Dive, which will bring together an overview of what is looking increasingly like a major stock market crash in early 2025—one that several significant voices in the alternative press this week have been saying could match 1929. We’ve had several articles about that in the headline section this week, but I’ll pull it all together for paying subscribers into one tidy bundle of analysis.

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