A subtle shift occurred over the weekend. What we might call "new normal" uncertainty gave way to genuine uncertainty after the Federal Reserve could not bring itself to raise its short-term rate even 1/4 of 1%. Genuine uncertainty leads to fear. Fear leads to panic. Panic has all sorts of bad consequences. This does not bode well for global financial markets or the world economy.
You see, it is a question of legitimacy. Since 2008, the Federal Reserve has been perceived as more and more important to the functioning of the "real" economy. After the initial fiscal stimulus of 2009, which petered out by 2011, the Congress has does nothing to help the Main Street economy. But Congress has very little standing among Americans anymore, who perceive correctly that its decisions do not reflect their best interests.
On the other hand, in terms of system justification theory, the Federal Reserve has been seen as more and more legitimate and important to the public interest.
We argue that there is a general (but not insurmountable) system justification motive to defend and justify the status quo and to bolster the legitimacy of the existing social order.
Such a motive is not unique to members of dominant groups.
We see it as comparable—in terms of its strength and social significance—to widely documented motives to defend and justify the interests and esteem of the self-concept and the social group.
We expand previous theoretical notions and claim that people want to hold favorable attitudes about themselves and about their own groups, but they also want to hold favorable attitudes about social and political systems that affect them.
This "system justification motive" has been so strong in recent months that political liberals, who ostensibly speak for the public interest, not financial interests, have anointed the Fed (its ZIRP policy) as the People's Savior. The Fed has been credited with lowering the unemployment rate to 5.1%, despite weak (if any) evidence to support the role of monetary policy in reducing unemployment.