Forbes – How The Federal Reserve Became History’s Biggest Bad Bank

7 May

Every time a plane crashes, a team of engineers and aviation experts jump into action, methodically reconstructing the event to determine the cause—whether mechanical failure, bad design, pilot error, or poor aircraft maintenance. This painfully acquired knowledge is then immediately fed back into remediation programs for existing airplanes, while informing future aircraft designs. If negligent culpability is found, executives are cashiered and enormous damage claims are paid. The insurers that make these payouts then revise their policies, rates, and eligibility requirements. Airlines with consistently bad safety records disappear. As a result of this feedback, air travel is safer now that it has ever been in the history of aviation.

Compare this to what happens every time a stock market, currency, or national economy crashes. Teams of bankers, economists, and technocrats are dispatched by those in power—to deny responsibility and affix blame on rival bankers, economists, and technocrats. Financial engineers who examine the wreckage rarely agree on what caused the problem, and even when they do politicians ignore their recommendations if they find them unpalatable. Painfully acquired knowledge is usually dismissed because “this time is different.”

To read the rest of the column click here.


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