“. . . how can an economy in which wage-earners are losing purchasing power and jobs growth lags population growth be expanding as robustly as the Fed claims?” C H Smith

Systems theorist/anthropologist Gregory Bateson developed (with others) the concept of double bind, a psychological and social conflict in which contradictory demands generate a form of schizophrenia:

Unlike the usual no-win situation, the subject has difficulty in defining the exact nature of the paradoxical situation in which he or she is caught. The contradiction may be unexpressed in its immediate context and therefore invisible to external observers, only becoming evident when a prior communication is considered. Typically, a demand is imposed upon the subject by someone who they respect (such as a parent, teacher or doctor) but the demand itself is inherently impossible to fulfill because some broader context forbids it. For example, this situation arises when a person in a position of authority imposes two contradictory conditions but there exists an unspoken rule that one must never question authority.

The Federal Reserve’s communications and policies are a form of crazy-making double bind. No wonder the economy and everyone participating in it are beset by various manifestations of mental and physical illness.

On the one hand, the Fed insists the economy is expanding and all is well.If this is true, then the Fed should allow interest rates to normalize, i.e. be unleashed from the Fed’s financial prison and allowed to rise to whatever the market of borrowers and lenders sets as fair in the current climate.

But the Fed also insists that it cannot allow rates to rise. If this is true, then it means the economy is weaker than the Fed would have us believe. Continue reading →