How Widespread Beliefs Shape Culture and Markets

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1:12Well, in general, common knowledge is generated by something that is conspicuous, public. So face-to-face meetings can generate common knowledge in a way that, say, remote meetings don't. That is, when you're in a room, You see everyone else. They say you. You know that they're seeing each other and seeing the speaker or the leader, going back to the economy as a whole. The reason that statements from the Fed are scrutinized and poured over like rabbis parsing the Talmud is that anything that the chairman of the Fed says can create its own reality when people, knowing that other people have heard it, will act on it out of anticipation of what other people will do, which can then feed on itself and create a bubble, a recession.

2:08So I quote Alan Greenspan, who at one point said, since I've become chair of the Fed, I've learned to mumble with great incoherence. If I seem clear to you, you must have misunderstood what I said. Because a signal that, say, a recession is ahead will create that recession because companies won't hire out of fear that they'll have to lay off employees. consumers won't buy out of fear that they might lose their jobs, each of which then creates the reality of the other.