The Futility of Policy: Central Bank critique

Aitken Advisors has always relied and will always rely on quality of client, as opposed to quantity; and there was no higher quality client than the man we lost three weeks ago.

Because he cherished his privacy, wanted to protect his family, and expected no fuss he shall remain anonymous.

We met in 2007, when I was delivering a plumbing talk to the markets team at a certain institution.

He was one of the handful of employees who understood the gravity of the problem, and so began a conversation that only ended a month ago.

It surprised nobody that the intellectual rigour, intelligence, practical expertise, industriousness and decency our late friend displayed in the public sector were soon sought in the private sector, and he spent his final fifteen years working for one of the very best.

I have spent the last two weeks re-reading our many years of correspondence: he was sparing in his praise, and could be withering in his critique.

Yet there was never any malice, nor nastiness behind the latter: he tolerated no intellectual flabbiness or woolliness, especially when it came to the Fed - and you knew he had read every speech, every transcript, and every footnote.

He’d read it all, and triangulated it all because that was his job.

He understood every subtlety, and never fell into the normative trap that clouds and thereby wrecks most Fed commentary.

He had the added skill of understanding how policy would translate to markets, and to the plumbing.

‘Uh, are we sure about that, James?’

I came to understand that gentle admonition (complete with fact-based explanation) from him would force me to reconsider my priors, and most often compel me to change them.

To be clear: he never, ever discussed what his firm was doing. Ours was a pure policy debate, underpinned by publicly-available evidence.

Across all the years of correspondence (and meetings) his objective was to stress test and to improve my understanding of the Fed’s reaction function, and the probable consequences.

Ditto post-crisis regulatory reform, and the plumbing in general. He was a sounding board, par excellence.

I will forever be grateful to him for that: I have been blessed with many great clients, but none of them impacted my thinking on the Fed like he did.

His courage and example over the last five years of his brutal battle will not be forgotten; we all miss him, terribly, but he insisted we all keep pushing on.

Why the photo of the front piece of the late Stephen Axilrod's book?

Our courageous friend agreed we ought ignore all the post-GFC, auto-hagiographic, exculpatory policy maker memoirs: he often reminded me that if you really want to understand the Fed, then study the late Stephen Axilrod's book.

So buy it.

Read it.

Study it.

In so doing, you'll be paying an indirect tribute to a great investor, and a great man.

JA