The Fed Still Has On Its Beer Goggles

Tyler Durden's picture

Authored by Danielle DiMartino Booth via,

Coulda, shoulda, woulda. How different would the world we live in today be had the Federal Reserve shown restraint and practiced self-control in the current economic recovery? Where would the stock market be if Fed officials had not placated investors every time they threw a temper tantrum, demanding more stimulus?

We will, of course, never know the answers to these questions. But we can hope that the next generation of Fed leaders does have the wisdom and courage to push back against the market’s demands in favor of fostering long-term stability and economic growth.

Soon after ringing in 2014, a hilarious column by one of my closest friends, market analyst Peter Boockvar of the Lindsey Group, made me laugh out loud.

I forwarded “Beer Goggles” to Dallas Federal Reserve president Richard Fisher, who loved it when I shot great metaphors his way.

Not long afterwards, Fisher quoted Boockvar, giving what would become his most famous speech: “QE puts beer goggles on investors by creating a line of sight where everything looks good.”

For his “wine and martini” audience, the National Association of Corporate Directors, Fisher defined the term “beer goggles,” described in the Urban Dictionary as the effect that alcohol has in rendering a person alluring who one would ordinarily regard as unattractive.

“Things often look better when one is under the influence of free-flowing liquidity,” Fisher said. “This is one reason why William McChesney Martin, the longest-serving Fed chairman in our institution’s 100-year history, famously said that the Fed’s job is to take away the punch bowl just as the party gets going.”

Where are we now? Punch bowl, beer goggles. Different eras, same hangover.

Commercial real estate and bonds are more overvalued than at any time in history and stocks are trading at their priciest level save one period, the late 1990s before the dotcom implosion. The beer goggles, it would seem, have blinded investors to the bubble wrap that’s enveloped their portfolios.

There are a few brave souls at the Fed who have raised a red flag. On March 22nd, Boston Fed President Eric Rosengren warned, “…we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn.”

Wiser words, especially given so few who recall that it was not the decline in oil prices that made the late 1980s such a painful period for the economy, but rather the crash in commercial real estate the energy crunch catalyzed.

Underlying the multiple overheating markets is a persistent underappreciation of financial instability among Fed policymakers. The institution, overladen as it is with PhD economists, has yet to revisit the models that drive its setting of interest rate policy. Had the Fed’s inflation metrics taken into account runaway stock prices in the late 1990s and skyrocketing home prices in the early 2000s, it’s likely they would have intervened to tighten financial conditions much sooner than they did.

Revisiting the wisdom of former Fed chair McChesney Martin is useful:

The danger with these econometricians is they don’t know their own limitations, and they have a far greater sense of confidence in their analyses than I have found to be warranted. Such people are not dangerous to me because I understand their limitations.


They are, however, dangerous to people like you and the politicians because you don’t know their limitations, and you are impressed and confused by the elaborate models and mathematics. The flaws in these analyses are almost always embedded in the assumptions on which they are based. And that is where broader wisdom is required, a wisdom that these mathematicians generally do not have.

You always want these technical experts on tap in positions like this, but never on top.

The hope is that President Donald Trump heeds McChesney Martin’s 1970s-era wisdom, that he respects the wishes of those who originally envisioned the Fed as an appreciably more intellectually diverse entity. After all, the original 1913 Federal Reserve Act requires the president to appoint leaders across a diversity of industries.

That is certainly not the case today. Of the 17 leaders on the Federal Open Market Committee, which sets interest rates, 10 are PhD economists and two are lawyers. Few would dispute this makeup is the antithesis of "diversity."

President Trump has few opportunities to make his mark, unheeded by others’ influence. The choice of the Fed’s future leaders is a rare and exceptional place for him to leave his mark to the benefit of generations of Americans to come.

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wisehiney's picture

Nary a Spartan in sight.

Looney's picture


the effect that alcohol has in rendering a person alluring who one would ordinarily regard as unattractive

“There are no ugly women, just not enough vodka”.   ;-)


Cognitive Dissonance's picture

There is nothing more dangerous than experts who are convinced they are right.

Never question your basis once you have arrived at your conclusion. All that does is unsettle the concrete that passes for critical thinking.

WakeUpPeeeeeople's picture

Will somebody get the garden gnome a pair of Japanese rain goggles.

new game's picture

growth on a finite sphere. bringing this growth forward will not work. that is what has been done, not to mention the imense waste of resouces, wastefully used. china takes that cake right now. also the military is another destructive resource brought fwd. and this one takes all cakes! resource and human waste. oh yea, some broken windows to replace, lol'g as i finish the absurdity of this comment...

economessed's picture

Confession:  postgraduate degree in econometrics and quantitative statistics.  Spent a decade of my life writing trading models for treasury bonds and running portfolios on top of them. 

I got out of the business when the level of complexity vastly exceeded all reasonable levels of comprehension.  This article nails it.  People tend to convince one another than they can just keep on throwing lots of math at profound complexity to explain it all.  My experience tells me that it isn't the math that's at fault (it's deterministic) -- it's the people.  People rationalize things.  People are emotional creatures.  People suck at understanding their own mental frailty.  Humility won't advance your career, but realizing your brain is an insufficient tool for predicting the future is the first necessary step of progress.

marathonman's picture

There are way too many feed back loops that act to destabilize finance.  Initially it's all great and looks like growth.  At the end it destabilizes and feeds back in destructive ways that TPTB try as hard as they may can never control.  The game must eventually be reset to start a new game.  Lather, rinse, repeat.

BigFatUglyBubble's picture

If a lake was vodka, and I was a duck, I'd swim to the bottom, and never come up.

But a lake is not vodka, and I'm not a duck, so pass the bottle, and shut the fvck up.

clade7's picture

No kidding!  As succinctly stated in Mel Brooks' History of the World...We are in the 'red hot poker up the ass' phase! 


"Was that considerate?  Was that polite?  And not a tube of Peparation H in sight!"

LawsofPhysics's picture

By design. The Fed continues to enable the greatest transfer of REAL wealth in the history of the planet!!!!

Money creation has not required real collateral or real risk (bailouts and "mark to fantasy" accounting for everyone in banking and finance) for some 40+ years and yet people still accept the bullshit paper/digital promises in exchange for the products of their labor!!!

Oh well, stupid is as stupid does.

"Full faith and credit"

Mr. Kwikky's picture

Cui Bono? The untouchables from the synagogue of satan.

ebworthen's picture

It is confusing to conceive that 1 Trillion is 1,000,000 Millions:

With that kind of money, who couldn't make up some charts and models, throw in some gibberish and babble, and appear competent and sane?

Of course these same fools say that if you gave $4,000,000 to every individual Citizen it would cause hyperinflation and a currency collapse.

Get back to work Serfs!

NoDebt's picture

"The difference between stupidity and genius is that genius has it's limits."

- Some dead white guy

BigFatUglyBubble's picture

But we can hope that the next generation of Fed leaders does have the wisdom and courage to push back against the market’s demands in favor of fostering long-term stability and economic growth.

That's not how a ponzi scheme progresses, so this is a pipe-dream.

rejected's picture

"But we can hope that the next generation of Fed leaders...."

What an utter sickening thought.

Jesus, how long does it take people to learn?

Son of Captain Nemo's picture

McCeshsney was a fucking thief and a liar as well.

Because if he wasn't, he would have worked at the U.S. Department of the Treasury down the street because there wouldn't have been a Federal Reserve on Constitution Avenue in the "first place"!

J J Pettigrew's picture

Anyone who trades knows that getting in is a is the getting out that is the trick.

Ivory Tower theoriticians do not know this.....They never sense they might be wrong...

They never conceive of the notion they might have to actually exit that which they have created.

Yellen is slow to move because she can't fathom the predicament she is the can is kicked..

Keeping rates below inflation, while they ILLEGALLY PROMOTE INFLATION is theft and criminal. The only way to avoid it is to misallocate your resources into a very over valued stock market. have at it..

Colonel's picture

"President Trump has few opportunities to make his mark, unheeded by others’ influence. The choice of the Fed’s future leaders is a rare and exceptional place for him to leave his mark to the benefit of generations of Americans to come."

If Trump has any sense he would appoint Ron Paul as the future leader of the fed.

BigFatUglyBubble's picture

Ron Paul would fire everyone, then fire himself.

<<looks in mirror>>


clade7's picture

I Like this concept! I'm self employed, my boss is a real demanding asshole though...Eagle Scout, steady Eddie, up early and ready to go, all buttoned up shirt like Mr Rogers even....a real Poindexterry dick that no Woman would ever be attracted to and most guys would kick their ass...


So cut out the middleman and fire myself you say?  Is that possible?  Especially for showing up to work drunk and disorderly?  I got this!  I'll sell that fuckers tools and run up his credit cards!  Thanks!!!!  FREEDOM!!

J J Pettigrew's picture

And now the banks get near 1% on their excess reserves at the Federal Reserve.....and we get near zero on savings....still.

Why do banks get that rate on their excess reserves when the People of the country.....Don't?

What of the 14th amendment and EQUAL TREATMENT?  And whose money is going to the banks?  The taxpayer's money who

is still getting the near zero rate.

DontFollowMyAdviceImaDummy's picture

not even wearing keg goggles makes the financials math look good on almost any "investment" these days...

4 wheel drift's picture

pseudoscience ...   aka voodoo-math

atlasRocked's picture

All you have to do is study interrogation science to see Yellen's last "rate hike" explanation was a rambling, evasional fraud of an answer.

THEY ARE ALL LYING.  Evasion of a yes-no question is a form of deliberate prevarication, a cover up.

Here is how to spot liars - prevaricators:

Pumpkin's picture

Why does anyone still mistake pure satanic evil for incompetence?

Nurse Ratchet's picture

Sooooo, I take it you are losing your butt in the market.  They are all evil but what does that have to do with making money?

Nurse Ratchet's picture

I was very skeptical when I saw all of you zerohedge Shepwave pumpers on here. But after a couple of months you all have made me a b eliever. 


The way the markets gapped up this morning just like they said.  I wondere if they are part of the satanic cult the nutjob said below. 

either way thanks guys.


Here is from their blog post this morning




See what I meanBAM! You Just Can't Make This Stuff UP!

We saw the anticipated upward thrust this morning to fit into the anticipated overthrow as shown in the wedge pattern in the short term charts and analysis. Emphasis on short term. This was given last night when we published this morning's analysis and was based on the activity of yesterday.

Notice a lot of analysts are continually changing their charting analysis because they try to predict action too far out  in the future from what the current action is dictating. After a few decades of analysis we at ShepWave have seen this often in many analysts; many who are very good analysts. They just bite off too much to chew.

So please read the notes and analysis carefully in today's Updates.

Log In at for today's Intra Day ShepWave Updates.


hedgesofnight's picture

Stick with the ones with a good track record like SW.  ZH is not an analysis site. In fact it is becoming infiltrated with a lot of liberals on the boards. SW is good analyst and will not steer you wrong. It is good you found them. They tend to limit their new followers.

VWAndy's picture

 The Fed is now and always has acted with intent. They are not stupid or incompetent either.

   How is it that we let them get away with claiming to be all knowing experts. They lied about everything. Its not even a question its just basic math.

  The thing is this fiat has become our god. As a test I asked a person to pay me with something real. No cash,no check,no plastic. This guy lost his mind. He could not reason it out even though we were standing right next to a gas pump and a rack of car tires that he could have paid for with plastic or the cash in his pocket. No no he started talking about the law and shit. Like a good little cultist should.

  Look around folks.   See all this stupid?   Its all been paid for.  This stupid is funded by fiat and fiat alone.  Nobody would spend their own money to do these things. SJW ?   The NSA porn collection?  F35 craptor?  PPT ?

   The other day they found a giant pile of cash in Nigeria. Brand new bills right off the press. What were they buying?  A. They were buying a big ol pile of stupid thats what.

  The stupid is very well funded kiddies. Thats what this fiat buys first. Sure we might use it well after the stupid got paid. But grok this. Stupid gets paid first.


  The stall and bartering. Because the stupid should not be getting paid at all. Im thinkin the stupid might shut up if they went hungry or had to do all of it pro bono.

Last of the Middle Class's picture

An economist, by definition, is devoid of any negative consequences of his own actions. Even court jesters of old had more skin in the game, so to speak, than modern day economists.

Consuelo's picture



 How much 'math' does it take to figure out that an organization which is at once not an official arm of the government, but runs monetary policy all the same -- and fiscal policy by way of the tail wagging the dog, should not exist in the first place...?

Even 'critical experts' are so wrapped around the axle of Fed-as-permanent-fixture of the economy, they can't see clear to recognize the organization for what it is. 

A. Boaty's picture

Still legal to invest under the influence of free-flowing liquidity.

ImperialArmy's picture

Come back to us Ron, wherever you are....please come back.....ROOOOOOONNNN!!!

turkey george palmer's picture

If you need urban dictionary to know what beer goggles are.....You are a fag