A Parable on Transparency:
With respect the FED's new policy of Transparency and Policy Guidance, I would only respond with: Be careful what you wish for.....
Consider the fishing villagers who build their settlements far back from the tides as to avoid having their houses being washed away by unpredictable floods. They understood the concept of risk and loss and acted accordingly.
But soon arose a class of seers who would predict the ebb and flow of the tides. The patterns of the tides emboldened the wizards and comforted the people. And so soothed, the villagers built their houses larger and closer to the water.
Lo, while true that uncertainty had been diminished, nature's course remained. As such, when the inevitable floods did arrive, none were prepared.
Thus my comment on the FED's policy: Yes, transparency and guidance is needed presently to reduce volatility and perceived risk. Thus will the FED's desire for "asset substitution" occur and the wheels of finance will spin again.
However, the same pharmacy that dispensed "Measured Pace" should make sure to take the patient off this medication before they become reliant.
Harley S. Bassman
The Convexity Maven
