Our national obsession with staving off reality.

Charles Hugh Smith has an interesting piece today^[1] on the huge mistake we are making by permitting (or relying on) our central bank to masterfully maintain our comfy, delusional (but atrophying) status quo economy by manipulating interest rates and debt purchases.

The economy is way too complex to be amenable to manipulation by fallible humans and, says Smith, more to the point, the Fed is interfering with the operation of natural – and healthy – corrections in any economy. At some point inefficiencies and bad managerial and investment choices (think Solyndra) have to be penalized and serve as object lessons.

Smith makes the analogy to forest mismanagement where fires are prevented from consuming small amounts of dead combustible material per unmanaged, chaotic, natural – and ultimately beneficial – processes. This suppression of natural correction leads to needlessly destructive more massive conflagrations.

Smith also discusses how the stock market is acting like a dangerously high blood pressure reading of a patient who refuses to address his unhealthy life choices. The Fed's use of "quantitative easing" and a zero interest rate policy (ZIRP) are equivalent to a doctor's use of powerful drugs that target only the symptom of the patient's bad choices, namely, the high blood pressure reading.

This is wrongheaded if you are besotted with the progressive idea that humans can master complex systems.

But . . . if you believe that advanced degrees don't confer anything but a surface understanding of reality, and that that "through a glass darkly" deal is a good summary of human efforts to advance in the general direction of what might loosely be called wisdom, you have to fear the inevitable return of Reality. It has an annoying habit of seeping through window cracks and locked (mental) doors. More accurately, it has an annoying habit of crashing through the living room window like an 18-wheeler with no brakes.

We should all feel a deep, gnawing dread about what we are witnessing at the Fed – and throughout society – to forestall or delay healthy correction.

Mr. Wile E. Coyote always woke up at some point but it was never when he was in a good place.

Notes
^[1] "The Inevitable Failure of Mechanistic Monetary Policy." By Charles Hugh Smith, Of Two Minds, 4/3/15.