Therein lies the problem of invoking the financial markets to enforce policy discipline. Financial markets do not discipline policymakers, but they capture them, especially if they are central bankers. Quite how the Federal Reserve would break from the old regime by yielding to financial market tantrums is beyond my comprehension. Similarly, based on empirical evidence from repeated episodes, it is clear that the financial markets are neither informationally efficient nor are they useful price discovery mechanisms. Action in stock markets in America since the third week of December have only confirmed their schizophrenic nature.

Source: Mint January 07, 2019 17:46 UTC