even with a rather full punch bowl set out, the party steadfastly refuses to get started
Doesn't that depend on which party you're talking about?
I'm under the impression that the Fed's current policies are correlated with an asset bubble, and that's a classic "party" central banks are known to end in preference to a much worse end being forced later.
Re:Fed Leaves Interest Rates Unchanged
by eli_gottlieb on Thursday September 17, 2015 @09:16PM
(#10237034)
Yes, the problem is the even larger problem of a decorrelation between the economic "fundamentals" (eg: wages, energy prices, manufacturing outputs, service outputs, educational level) and the FIRE-sector asset markets. The latter got sky high before 2008, and have gotten pretty damned high again. The former started declining in the early 2000s, took a hard dive in 2008, and have basically never recovered.
The former are also much more strongly affected by fiscal policy rather than monetary.
More, low interest rates are insufficient tools alone to achieve the goals for which the Fed deploys them, so that the conditions which motivate low interest rates are not sufficiently resolved by them to move the market to conditions where low interest rates would stop being desirable.
Monetary policy isn't magic and even with herculean interventions has limited efficacy (basically, at the moment, limited to not making things worse); the problems it addresses often require simultaneous fiscal policy actions to achieve substantial, durable changes.
> At one time, it was the Federal Reserve's job:
> "to take away the punch bowl just as the party gets going"
That's still basically true. The thing is that, even with a rather full punch bowl set out, the party steadfastly refuses to get started.