George Santayana said: “”Those who cannot remember the past are condemned to repeat it.”

Roubini: You can call it whatever you like but one thing is obvious: the Fed easing is perceived by the stock market as an action aimed to prevent a recession from occurring and stock prices rally - in spite of worsening macro news that are signaling recession ahead - because of the hope - that I will show is only wishful thinking - that the Fed will be able to avoid such a hard landing. Thus, what has been mostly driving up the stock market in the cycles since last summers is Fed policy expectations of easing. The same pattern of market delusion and serial sucker’s rallies occurred in 2001: the economy entered in a recession in March 2001 but the S&P 500 index rallied by a whopping 18% in April and May because the market and investors expected that the aggressive Fed easing - that had started in January - would prevent a 2001 recession (the famed and deluded hope of a second half of 2001 “growth rebound” that never occurred).

The myth of the omnipotent Fed is all the more alarming because even the Fed believes it in the face of 94 years of counter-examples. The power of faith is amazing, isn’t it?

Edit: Futures are up tonight, apparently because Bernanke made a speech which hinted at further rate cuts. Well with T-bills at 2.8%, Ben, the rate cut has already happened. And by the way, now that cutting rates didn’t help, the solution is to cut them again? Like it will work now when it didn’t before? Because? Oh and Ben also said the decision will depend on data between now and the meeting. Ben, you have to be kidding. That has to be noise in terms of any trends, you can’t possibly project months out based on data over 8 days. At least Greenspan covered up the fact that he didn’t know what he was doing with doubletalk. Ben, you are an embarrassment.