Of Two Minds – A “Market” Crash Is Baked In–Here’s Why
Centrally planned markets enrich the few at the expense of the many. This is as true of “markets” in developed nations as it is in kleptocratic developing economies. The Fed is akin to Soviet-era central planners, and the net result is the same: capital is grossly misallocated, distortions are optimized to enrich the few at the top, and the market’s functionality is destroyed because it doesn’t align with the goals of the central planners.
Central planning hollows out systems and increases fragility and vulnerability. Once a market has been gutted and turned into a centrally planned “market,” it can no longer perform the key functions of markets: communicate information to all participants, discount flows of capital, goods and services, allocate capital, etc. These functions are what enable markets to alleviate poverty by increasing the wealth created by the free flow of information, goods, services, credit and capital.
Just as the collapse of the Soviet Union was baked in by the systemic fragilities of central planning, the Fed’s commandeering of the stock market bakes in a crash. In systems-speak, central planning manifests as non-linear effects, i.e. the consequences are not proportional to the triggering events.