Yoon Kim's  Instablog

The goals of Federal Reserver's monetary policy states according to the publication available on the website (

http://www.federalrese...):

The goals of monetary policy are spelled out in the Federal Reserve Act, which specifies that the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Stable prices in the long run are a precondition for maximum sustainable output growth and employment as well as moderate long-term interest rates. When prices are stable and believed likely to remain so, the prices of goods, services, materials, and labor are undistorted by inf lation and serve as clearer signals and guides to the efficient allocation of resources and thus contribute to higher standards of living.

But is the true price stabilization the actual goal here or the perception of price stability?

Back in 2007, John Stewart asked Alan Greenspan few fundamental questions, which reveals some candid thoughts I thought worthy to be rehashed:

Greenspan: ...what a sound money system does is to stabilize the elements in it and reduce the uncertainty that people confront, and when people confront uncertainty they withdraw and it reduces economic activity.

Stewart: So it’s all about perception then. It’s about making people believe the system is sound. If the stock market is high, people feel confident in spending, and if it lowers, they feel less confident?
Greenspan: Well…uh…I think you have to realize, there are certain aspects of human nature, which move exactly the way you defined it. The problem is, periodically we all go a little bit euphoric until we are assuming with confidence that everything is terrific, there will be no problems, nothing will ever happen, and then it dawns on us- NO!

So Fed actually gets in the way of free market price discovery by manipulating the money supply and aims to deceive the investors by installing fake confidence in the markets. In addition, they do not seem to get any better over time in this game of dollar monopoly:

Greenspan: I was telling my colleagues the other day… I’d been dealing with these big mathematical models for forecasting the economy, and I’m looking at what’s going on the last few weeks and I say, “Y’know, if I could figure out a way to determine whether or not people are more fearful, or changing to euphoric… I don’t need any of this other stuff. I could forecast the economy better than any way I know. The trouble is, we can’t figure that out. I’ve been in the forecasting business for 50 years, and I’m no better than I ever was, and nobody else is either.”

Watch the full clip here: http://www.comedycentr...

However, Greenspan was correctly able to forecast downfall of global real estate markets and pending challenges for a central bank chairman, so he was able to jump ship and pimp himself out to PIMCO for consulting fees. Desertion as defined by US Armed Forces:

885. ART. 85. DESERTION

(a) Any member of the armed forces who--

(1) without authority goes or remains absent from his unit, organization, or place of duty with intent to remain away therefrom permanently;

(2) quits his unit, organization, or place of duty with intent to avoid hazardous duty or to shirk important service;