As an electrical engineer, this makes all kind of sense to me. From the beginning, the Fed’s track record has been horrible. The financial system is just too complex and chaotic to be centrally managed. IMHO, we would be better off without central banks and went back on the gold standard.
I'm delighted not only by your kind words but also by the implication that my description of these electrical engineering concepts passes your muster :) As a software engineer by training who has had the privilege of working with some phenomenal electrical engineers in my career and thereby developed a simultaneous fear and respect of the field of electrical engineering, I wrote this piece with some trepidation that I would get things horribly wrong.
I also share your concerns about centralization of this level of control of the financial system and your sympathies toward outsourcing some of the control to an immutable measuring stick of some kind.
I've often thought that the most useful academic course I've ever taken was intro to controls as an undergrad. I'm always surprised at the sheer volume it applies to in the real world.
Good intro to some key control theory concepts, and your application to central banking is interesting. I think a key problem, though, is that control policies tend to be developed for systems that we can identify. A classic approach is to take non-linear behavior, break it into segments of linear approximations, then create a policy for to control the behavior for each of those segments. The problem with the central bankers is, they can't actually identify the system because it is so complex, yet they apply their policies as if they can. It makes it potentially much worse than what you suggest.
Agreed. And those in charge of the system now may be long gone by then so even their intuition and experience of the problem space will have to be relearned by their successors.
One could make a handsome profit simply capitalizing on the Fed's many mistakes. If putting food on your table depends on the Fed regularly screwing up, I don't think you're ever going to starve.
The question is really about how long it will take before you're proven right. The smartest people I listen to have been talking about how things will break and yet so far, the Fed seems able to keep the plates spinning. It's sort of impressive, really. You would think such reckless policy movements would break something quickly but the economy and financial system have been impressively robust.
I agree. When I say they have probably broken something, what I imagine is that someone in the financial system is experiencing some new stress and has called them to complain in a very convincing way. Also elections. I try not to be too cynical but policymakers have become unabashadly political and seem ready to do whatever it takes to retain their control on power.
As an electrical engineer, this makes all kind of sense to me. From the beginning, the Fed’s track record has been horrible. The financial system is just too complex and chaotic to be centrally managed. IMHO, we would be better off without central banks and went back on the gold standard.
I'm delighted not only by your kind words but also by the implication that my description of these electrical engineering concepts passes your muster :) As a software engineer by training who has had the privilege of working with some phenomenal electrical engineers in my career and thereby developed a simultaneous fear and respect of the field of electrical engineering, I wrote this piece with some trepidation that I would get things horribly wrong.
I also share your concerns about centralization of this level of control of the financial system and your sympathies toward outsourcing some of the control to an immutable measuring stick of some kind.
I've often thought that the most useful academic course I've ever taken was intro to controls as an undergrad. I'm always surprised at the sheer volume it applies to in the real world.
Thank you for the article! Looking forward to your next one.
Good intro to some key control theory concepts, and your application to central banking is interesting. I think a key problem, though, is that control policies tend to be developed for systems that we can identify. A classic approach is to take non-linear behavior, break it into segments of linear approximations, then create a policy for to control the behavior for each of those segments. The problem with the central bankers is, they can't actually identify the system because it is so complex, yet they apply their policies as if they can. It makes it potentially much worse than what you suggest.
Agreed. And those in charge of the system now may be long gone by then so even their intuition and experience of the problem space will have to be relearned by their successors.
One could make a handsome profit simply capitalizing on the Fed's many mistakes. If putting food on your table depends on the Fed regularly screwing up, I don't think you're ever going to starve.
The question is really about how long it will take before you're proven right. The smartest people I listen to have been talking about how things will break and yet so far, the Fed seems able to keep the plates spinning. It's sort of impressive, really. You would think such reckless policy movements would break something quickly but the economy and financial system have been impressively robust.
So true... Monetary lag was the catchphrase for 2023, yet nothing major seemed to break.
Well when the plates do fall, they're going to fall in spectacular fashion. Until then I suppose we just tag along for the ride.
As always . I learn something (a lot of something ) when you write. Thank you .
I agree. When I say they have probably broken something, what I imagine is that someone in the financial system is experiencing some new stress and has called them to complain in a very convincing way. Also elections. I try not to be too cynical but policymakers have become unabashadly political and seem ready to do whatever it takes to retain their control on power.