Pyrmonter sent me a link to a magnificent Alex cartoon.
This captures a sentiment that we see a lot in economic commentary – the view that the monetary authority (and sometimes the Treasury too) is somehow omniscient. That these economic agencies have superior access to information (maybe) and analysis (certainly not) and so have a deeper insight into the economy and economic prospects than anyone else.
An enormous “all-or-nothing” offer of the Niskanen (1971) variety was presented to Congress, in which there was a strong presumption that the Secretary of the Treasury and the Chairman of the Federal Reserve knew more than the general public, Congress, or outside experts (as in Breton and Wintrobe 1975). The “experts” presumably had access to data that no one else had and used that information to sound alarms that the world economy was about to collapse.
There is some evidence that the “Great Depression” rhetoric used to secure passage of the bailout bill exacerbated the credit problem and the recession. Because individual investors and firms naturally assume that Treasury experts have the very best data, the risk of another Great Depression apparently was “new news” to many of them.