I can say with complete authority that there is not one real economist on the Federal Reserve Open Market Committee. How do I know? I am a real economist and I know political hacks when I see them. The Federal Open Market Committee consists of hired guns carrying out the political agendas of others who helped them get appointed and confirmed. Having a degree does not make a person an economist. A degree is no indication of competence. Don’t get me wrong, these folks are not morons. They are some of the finest statisticians, accountants, and mathematicians in the world. They are so good that they can fool just about anybody by talking over their heads and dazzling them with terms only they understand. I am not impressed, partly because I am not bad at math myself but more so because I understand the limitations of mathematics and statistical models.
For an engineer building a bridge math is an indispensable tool. For a social scientist, math is good only for describing what has happened up to the current time frame. Economics, mathematical models have no predictive value. The multitude of suckers who comprise the American population believe every word that comes out of their mouths. When an institution like the Federal Reserve makes a decision, it changes all of the incentives that cause men, women and children to do what they do. The model therefore becomes immediately useless.
The models are useful to open market members because they allow them to cite reasons for what they do. In 2008 economists earned a lot of money convincing fools they could save the world from an economic disaster. What they have done is prevent the economy from ever recovering. Quantitative easing has never been anything other than the carrying out of a wealth transferring political agenda. That goal has been accomplished and now the focus has changed to preserving the wealth and power of the financial elitists who determine their agenda.
The job of the Federal Reserve is to increase the wealth of all who help the members get nominated and hold on to their jobs.
Right now the primary job of the Federal Reserve is to push the stock market higher for the benefit of all who have political authority over them.
The algorithms they use are complex but what the algorithms accomplish are simple. Anyone who has traded for a long time can notice prices being supported, in much the way stock prices have always been supported with respect to new offerings. The firm handling the offering has legal authority to manipulate the offering price steady for a certain time period. The Fed is not limited by the law, so deals can be made to prevent stocks from falling for many days running. Each day a small number of stocks are goosed to serve as confidence builders. Every effort is made to make it appear as if the market is about to fall so as to suck in short sellers who are subsequently squeezed out of their positions. This is all government business. Anyone can notice on days when there is news that would normally cause a shake out, central banks buy with both hands and halt any sell off early on.
The unsuspecting investing public is happy as larks because they are watching their IRAs rocket in value. Only a few will ever get their money out at a profit. Why? Only a handful can sell at the top and a few more will be able to sell at a profit at all. This is where math actually is useful. It is mathematically impossible for everyone to sell an investment at a profit when it is severely is severely overpriced. Folks will be shocked at how fast value comes out of their holdings.