About the Name ...

For those wondering about the name of this blog, it is best explained by starting with a well known analogy for the idealized role of the Federal Reserve within an economy, then going a step or two further.

The Well Known Analogy

Think of the American economy as a gathering of people where alcohol is served - the level of excitement and frivolity is directly proportional to the amount of alcohol consumed. The amount of alcohol available for consumption is controlled by the party host - when more alcohol is made available, more is consumed and the party becomes lively. With less alcohol, the party becomes subdued.

The wildest parties occur when there are no limits on alcohol consumption - we'll get to that shortly.

So, what is the role of a responsible party host/central banker? As once described by former Fed Chairman William McChesney Martin, it is the job of the central bank to "take away the punch bowl just when the party gets going". That is, to provide just enough stimulous in the form of alcohol/credit to get everyone talking to each other and feeling good - to add "lubricant".

Great care must be taken, however, to apply this stimulus in moderation.
Unpleasant things can happen when people drink too much or borrow too much money - reckless behavior and terrible accidents during the consumption phase, followed by heartache and regret later.

A single decision made while under the influence, can have a life altering impact.

The Current Party

We now find ourselves in the wee hours of the morning. This party has been going on for a long time - much longer than most people expected. The party host has provided so much top shelf liquor, fine wine, and beer, the guests have barely noticed that they have been drinking quite a bit more than usual - everyone has been having such a good time.

There was also a big party the previous night.

Usually, the host allows at least a few days between parties to tidy things up, but the current party is really just a continuation of the previous party - that party had only liquor and fine wine, tonight's party also has beer.

Most of the beer drinkers stayed away from the previous party - they don't really appreciate top shelf liquor and fine wine. Judging by the size of tonight's crowd though, it is very clear that just about everybody likes beer!

But it is quite unusual having back-to-back parties like this.

What Mess?

It looks like everyone is having a good time at this party, so, where's the mess?

Well, it's hard to see the mess when the party is still going on - hard to see because people are not looking for it and if they do see something out of place, they are apt to igore it. Everyone is having such a good time and they want the good times to continue. Why not?

But, the mess is actually everywhere - empty bottles and cans on the floor, trash overflowing, pictures askew, spilt food on coffee tables and countertops, ashtrays overflowing. Stains on the carpet from who knows what, broken patio furniture, uprooted shrubbery, and fresh tire tracks on the front lawn.

The mess is there and it is horrible. It is made even worse because no one cleaned up from the previous night's party. In fact, much of this mess is left over from the previous night and now it is all really piling up ... and it is starting to stink!

Last Call

Now it seems that the host has grown tired of his party and all the guests. He may have finally realized that things have gotten a bit out of control with all the alcohol that he has supplied - maybe it was just too much.

But now, he finds that nobody wants to leave - in fact, as late as it is, people are coming in through the front door faster than others are leaving. The free booze has drawn people from all over and they continue to arrive - everyone just loves a good party.

The party host is pictured here reviewing the guest list, considering what to do next - trying to figure out who can clean up the mess - he's going to be leaving shortly.