It stuns me to see serious adults giving credence to this Fed nonsense. The “dot plot,” for example. Doesn’t anyone else realize how absurd that is as a forecast? How can you take these people seriously?

I understand at one level that you have to take them seriously because they wield a lot of money and they are dangerously insane. So if you are locked in a room with a madman – or woman as the case may be – with an axe you keep your eye on him or her. But you do understand that he or she is mad. Here, people simply don’t understand that the Fed is mad.

The Fed is mad because it is both irrational – it goes on hope, belief and superstition, and insane in Einstein’s sense of failing to learn from experience. Which is the worst possible flaw, since heuristic methods are the only choice given the lack of a functioning predictive theory of macro-economics. It undertakes innovative, radical monetary strategies and then ignores the outcomes, choosing instead to repeat them when they fail. What’s the point of doing experiments and then failing to learn from them?

In the meantime, the third bubble just gets bigger and the eventual catastrophe more terrible. The inflation numbers? Dismissed as “noise” by Ms. Yellen, who also says “the stock market isn’t vastly overvalued.” Madam, I beg to differ. For the record, I expect that in due course we will see the 30-year Treasury under 1.5%, with the S&P in the 400s or below.

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