The understandably clueless Fed...

The soon to come hullabaloo will be all about the Fed's 2007 meeting transcripts released yesterday morning. Apparently all that brainpower brought to bear onto U.S. monetary policy didn't see the credit crisis coming. Now I want to encourage you not to think too poorly of Ben Bernanke and company. Their inability to predict should not be levered to question their intellect. For the most impressive of human brains, with the most advanced artificial intelligence at his/her disposal, will never, ever, grasp more than a microscopic quantity of all the elements at play in the global economy.

And thus it would be equally narrow of us to give credit for today's growing (albeit somewhat tepid) economy to the actions reactions of the same group of characters. Again, the elements at play are incalculable, both in terms of volume and velocity. Ah but they will indeed claim the credit. They will convince us that were it not for their genius we would have suffered a far worse contraction. They'll have us believe that while they could not see the unseeable ahead of the crisis, they have, after the fact, contained the elements and have stimulated them in a manner that has led to recovery. And, sadly---because their reactions we can see---believe them we will. For as Friedrich Hayek pointed out in The Fatal Conceit:

The role played by government is greatly exaggerated in historical accounts because we necessarily know so much more about what organized government did than about what the spontaneous coordination of individual efforts accomplished.