Hussman’s Broadside Attack On Fed Policy

“Before the 15th century, people gazed at the sky, and believed that other planets would move around the Earth, stop, move backwards for a bit, and then move forward again. Their model of the world – that the Earth was the center of the universe – was the source of this confusion,” writes John Hussman, president of Hussman Investment Trust, at the beginning of his broadside attack on Federal Reserve policy that questions whether the Fed even understands how the economy works. “One of the reasons that the economy seems so confusing at present is that our policy makers are following models that have very mixed evidence in reality.”

The model that the Fed is using, Hussman argues, is...