tastytrade logo
board of governors flag on computer screen

Jan 28, 2022

Leading From Behind

By:Dylan Ratigan

Mainstream financial media loves to make a big deal of Fed Open Market Committee meetings. Back in the 90s, Mark Haines of CNBC invented the “Greenspan briefcase tell.” If Alan Greenspan, then Chairman of the Fed, was carrying a briefcase, then the Fed was about to raise rates. It actually worked surprisingly well. But the truth is, the Fed doesn’t decide on rates and hasn’t taken a leadership position on interest rates in a long time.

The Fed vs The Market

When it comes to raising or lowering rates, we’re really talking about a vetting process for what’s needed. The Fed is made up of academics who established their respective bona fides through studies and papers. In turn, they are seen as trusted individuals because of their rigorous academic credentials, much like doctors. They are not the only ones vetting though and maybe not even the best choice.

The other entity that’s vetting is the market itself. If you’re an efficient market theorist, there is no more qualified body than a liquid market. And subscribers to this theory understand the market is already signaling higher interest rates ahead. That leaves the question, why the disconnect between the Fed leaving rates alone and higher interest rates in the bond market?

Well, your guess is as good as ours. But it seems no one at the Fed wants to actually lead and do what’s necessary. Where markets don’t care about repercussions, which is what allows them to be efficient, individuals don’t want to be seen as the one who turned on the lights and told everyone the party is over. As a result, individuals become less efficient about doing what’s needed and you end up with a Fed that continually kicks the can down the road.

Federal Reserve Decision & Inaction

Unfortunately, we’ve arrived at a place where the Fed reflects the rest of our politics. They’ve become less about doing. No one wants to be the incumbent party because criticizing, obstructing and delaying is a lot easier than actually making a call. Ultimately though, decisions do have to be made and the longer those decisions are put off, the harder they become to make.

Whether it’s 4th and 1, cutting off a leg to save a life, or raising interest rates, tough calls in respective fields have to be made from time to time. Who is best at making those calls is a matter of debate. But leading from behind isn’t leading and a Fed that can’t make tough calls has no need to ever carry a briefcase.




Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com. 

tastytrade is a trademark/servicemark owned by tastytrade.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).

tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

© copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on tastytrade.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.