On August 27, 2018, Fed Chairman Powell announced the Fed would raise rates and shrink its balance sheet “until something breaks”.  The decision to end ZIRP and QE isn’t troubling.  What is distressing about this comment is it shows the Phd Economists at the Fed know so little about the financial system, the financial markets or the real economy, they have no idea what will break, when it will break and what will happen as a result.

If the PhD Economists did know, no prudent person would deliberately pursue a policy causing either the financial system, the financial markets or the real economy to break.

Furthermore, Chairman Powell’s statement assumes a decade after the acute phase of the Great Financial Crisis the financial system, the financial markets and the real economy are not still broken. There is no evidence to support this assumption.