Among the Cokehead Federal Reserve Lab Rats

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Regrettably, Sehgal fails to report experiments in which rats, offered a lever that releases cocaine, press for more and more stimulis until they die, even though this model would explain the Federal Reserve’s approach to interest rate cuts.

Jay Weiser, Review of “Coined: The Rich Life of Money and How Its History Has Shaped Us” by Kabir Sehgal, The Weekly Standard

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“I could sure go for a few lines of coke and an increase in the money supply.”


I was basking in the sun with my buddies Mikey and Ike, my fellow lab rats here at the Federal Reserve Bank in Boston, down on Fort Point Channel.  Every now and then one of us would pinch himself to make sure he wasn’t dreamin’.  We had the greatest job on earth–all the cocaine we could sniff, plus our little paws held the levers that could rattle world markets through manipulation of interest rates and the money supply.

“You guys up for a game of Scare the Tourists?” I said to my two confreres. 

“We did that yesterday,” Mikey said as he propped himself up on one elbow, the better to gaze at the waters in the channel; when I started out in the lab rat business, it was pretty disgusting.  Now, thanks to a billion-dollar cleanup paid for by taxpayers across the country, the waters were safe for us to swim in.  We’d emerge wet and slimy onto the banks and chase picnicking secretaries who’d drop their ham sandwiches and yogurt for us to nosh on.  Life was good.

“Okay, you slackers,” I said.  “But don’t fall asleep.  We’ve got some heavy lifting to do after lunch.”

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“Yum–Charles River Rat Food!”


“Why–what’s up?” Ike asks.

I gave him a withering look.  It’s amazing to me how some guys think working for the most powerful central bank in the world is a job you can just blow-off whenever you feel like it.

“Haven’t you been paying attention to what’s happening in China?” I asked incredulously.  I don’t often append an adverb to my questions, but I felt the need to emphasize the importance of the afternoon that lay ahead of us.

“If it wasn’t on the sports pages, he missed it,” Mikey said with a sly grin.

“They devalued their currency, then they lowered interest rates,” I said.  “Take a peek at the TV screen in the employee cafeteria.  They’re taking pictures of the floor of the New York Stock Exchange, so you know the world’s going to hell.”

That caused the Ikester to sit up and take notice, although not without some difficulty.  He’s not exactly Pilates-class material, if you know what I mean.

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“Eek–a mouse.  Must remain centered.”


“So what does that mean?” Ike asked.

“Who knows?  But the first thing you need to do is panic.”

“Why is that?”

“It’s a fundamental rule of stupidity that applies whenever any dramatic change occurs in financial markets: Don’t just stand there, do something, even if it makes no sense.”

The guys got the message, so we got up and started to amble back to the bank’s unique “washboard” building on the Boston waterfront.  The slab of silver metal and glass was apparently designed by somebody who dreamed of a career in household goods and sundries–whatever they are–but flunked the high-stakes aptitude test and was instead relegated to an ignominious career as an architect.

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“So how exactly do you propose to solve the world’s financial crisis while we’re stoned out of our gourd on cocaine?” Mikey asked.

“Are you kidding?” I replied, channeling my inner Nancy Pelosi, which hasn’t had quite as much plastic surgery as the other one.  “Sucking white powder up your nose is the model recommended by Nobel Prize winning economists for fine-tuning the world’s third largest economy, after Starbucks and the Vatican.”

“It is?” Ike asked.

“Sure,” I said as we entered the free cocaine bar on the 29th floor, right down the hall from the regulatory library that was frequented by the author of this post in his salad days as a banking legal beagle.  “If you keep pushing this lever,” I said as I pushed the lever, “all of your inflationary worries disappear as your nose grows numb and your whole body starts to buzz.”

“Ahh,” Mikey said as he snorfed up a line that looked like a windrow of fescue in the August sun, to wax poetic for just a second.

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Windrows:  NOW we’re talkin’!


“Okay, your turn,” I said to Ike, and he inhaled his portion like a shop-vac cleaning up a basement after a flood.

He finished his line and then it was my turn; I cleared my head of anti-inflationary thoughts, exhaled, then Hoovered up my line like my mother’s old canister-style vacuum cleaner.

“Primo,” I said, as mopped the residue around my nostrils with a wet finger, then licked it so as not to waste any.  Like the nuns in grade school told me: appreciate every gram of your controlled substances, kids are going to bed straight all over the world.

We could have sat back like fat satraps plastered in an opium den then, but we had work to do.

“Mikey, push the M1 button,” I said sharply, like the captain of a ship changing course in mid-battle.

“What’s M1?” Ike asked, and rather dully I might add.

I’m sure my mouth dropped open when my ears heard what he said.  “How long have you been working here?” I asked with a full measure of disbelief in my voice.

“With a life span of 2 to 3.5 years, I can’t be expected to learn everything,” he said defensively.

“M1 is measure of money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal accounts,” I said slowly and clearly, as if reciting the rule against hitting your sister to a particularly dull 8-year-old boy.  “It measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency.”

“Okay–what do you want me to do with it?”

“Pull it–hard!” I said, and you could almost feel liquidity pulsing back into the barren nooks and crannies of the American economy, like butter melting into an English muffin.  “Now you!” I screamed at Mikey.


“I want you to go upstairs and scare the beejezus out of Lael Brainard.”

Brainard:  “It was this big, I tell you!”


“What’s a . . . Lael Brainard?”

“Just the hottest Governor of the Federal Reserve there ever was.”

“What good will that do?”

“Maybe she’ll raise interest rates, so that investment will flow out of some of the goofier asset classes that have been soaking it up . . .”

“Like what?” Mikey asked.

“Vacation homes, baseball cards, and Star Wars memorabilia.”


Available in Kindle format on as part of the collection “Our Friends, the Fed.”

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