The Perverse Theater of Monetary Policy

A deranged soliloquy on Jerome Powell's 25bp tantrum and the death of financial gravity

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The Federal Reserve cut rates by 25 basis points yesterday. Fed cuts rates 25bps, ECB steady and markets did exactly what you'd expect in this upside-down funhouse we call modern finance: they tanked. The S&P 500 dropped 0.1% and the tech-heavy Nasdaq fell 0.3%. Because nothing says "this is fine" like cutting rates and watching equities sell off.

Powell called it a "risk management cut" as the labor market deteriorates. Risk management. As if monetary policy has become some sort of portfolio insurance scheme rather than the blunt instrument it actually is. The Eccles Building has morphed into a hedge fund with a printing press, constantly hedging against the consequences of its own prior hedging.

Meanwhile, Bitcoin—that digital barbarous relic that was supposed to be uncorrelated with everything—decides to have its own existential crisis. Bitcoin was priced at $115,191, a 1.9 percent decrease in 24 hours, despite this being Bitcoin's second-best September ever with 8% gains for the month. The perversity is almost artistic. Historically September has been Bitcoin's weakest month, but 2025 had to be different because apparently everything must be different now.

8 of the top 10 cryptocurrencies are in the red today, with the global crypto market cap falling by 0.8% to $4.17 trillion. Four trillion dollars of make-believe value getting marked to market in real-time, responding to interest rate moves that wouldn't have mattered to a savings account twenty years ago. The reflexivity is nauseating.

And where was the ECB in all this? Sitting still, naturally. Their staff projections see headline inflation averaging 2.1% in 2025—close enough to target that they can afford to watch Jerome's one-man show from the sidelines. Core inflation expected to average 2.4% this year, which in central bank speak translates to "we're not moving until something breaks."

The Europeans have mastered the art of doing nothing while appearing thoughtful about it. Their economy is projected to grow by 1.2% in 2025, revised up from the 0.9% expected in June. Stunning. A 0.3 percentage point revision that will be breathlessly analyzed by thousands of economists who will find profound meaning in what amounts to a rounding error.

This is where we are: quarter-point rate cuts trigger market seizures, digital tokens worth more than most countries' GDP gyrate on Federal Reserve press conference word choice, and the global financial system hangs on the mood swings of a dozen unelected officials who speak in code because plain English might accidentally cause a recession.

To match the last cycle's magnitude, Bitcoin would need to reach around $327,000, according to cycle analysts still pretending mathematical progressions govern speculative manias. The same crowd probably has Excel models showing exactly when the next financial crisis will arrive, down to the minute.

Powell's "risk management" is risk creation. Every intervention breeds the need for the next intervention. Every cut plants the seeds for the next cut. The system has become a perpetual motion machine powered by its own contradictions.

The theater continues tomorrow.