Chapter 2 In The RRP Fairy Tale

This is the essence of the “fingers crossed” strategy that is perhaps the inevitable, extreme end of rational expectations theory. The Fed simply says it and hopes that the market does it. When shown that isn’t happening, the Fed responds by changing the subject and hoping not enough people notice. That’s the problem with China and why it may be a paradigm-altering outbreak of the same “dollar” issues; you can’t ignore it and these repeated intrusions erode confidence in general, if not specifically money markets, about monetary policy.

The RRP was a fairy tale under testing in September and October 2014 (to which the Federal Reserve and US Treasury Dept. blamed some computers for October 15) and unsurprisingly it still is under full rollout and live action. Unfortunately, that vicious connotation applies far beyond the RRP’s very limited range, standing for the competence of monetary policy and policymakers more broadly. From there, you can start to appreciate the increasingly unsteady world around us.

1 2 3 4
View single page >> |

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.