Unfortunately, this is what happens when you have a bunch of academics and politicians managing the global economy.
Most of the people trying to “fix” our problems or create policy have little to no real life banking or market experience. They’re the generals on the battlefield, but they’ve never been in a bunker when the bullets start flying. All they’ve ever done is read about it....The whole system is backwards because of it. The academic economists always wait for the data to tell them where we’re headed. Classic scientific method. Thus, the Fed/government is always reactive to issues rather than trying to get ahead of issues as the market does. The inverted yield curve was forecasting the bond market’s concerns about the global economy since 2006, but our policy makers did nothing until late 2007. The global economy doesn’t subscribe to the scientific method. It is a forward looking system. If you wait for the enemy to advance into your backyard you can’t expect to defend against it effectively. That’s our approach and it’s due to the academics and lieutenants who run this army.
Barney Frank (has no real financial background and arguably helped cause this mess by transferring FNM/FRE oversight in 2000), Tim Geithner (former NY Fed watchdog who witnessed this crisis implode in his backyard), Hank Paulson (arguably had more to do with causing this mess than anyone as he ramped up GS leverage and innovation in an attempt to ramp up EPS) Ben Bernanke and Alan Greenspan (nothing more than glorified academics) are not qualified to deal with this problem. Why do we elect/nominate people to run the most important element of our government when they have no real financial experience or expertise?
It makes no sense. And then when we finally decide to put real life bankers and “market experts” into power positions we choose the exact people who helped cause this mess - Paulson and Geithner for example. Does the government understand markets & economies at all? I don’t think so. It’s as if we built the world’s strongest military and then shoved all the Generals into a closet while the Lieutentants man the war room....25 years of Keynesian academia unraveling before our very eyes.