The enforcement of the law against recessions has never succeeded in eliminating the waves – it only distorted them in the extreme. The Federal Reserve has tried many times to, at least in effect, eliminate the waves – but has at least ultimately always been unsuccessful.
One recent, and somewhat shorter-term, example of such a case, one in which the waves played themselves out in real-time despite the Fed’s best efforts, was when, in 2005-2007, the bankers were lending quite recklessly – the lending cycle had been taken to an extreme in the positive direction (totally so in this case as a result and consequence of the Fed’s past actions to keep the economy going) – and the Fed begged the banks over and over again to reign in their lending, lest it result in a major lending bubble.
To no avail – the banks continued to lend the way they wanted to, making clear all along the way that the business was so good at the time that they just did not want to pass it up.
Then came the credit crunch in early August 2007 – and the game was up. Suddenly, the banks did not want to lend much anymore.
The Fed did everything it could to stabilize the system – but we have never again returned to even a normal level of lending.
In the meantime, for a couple of years – basically as long as the Fed was trying to encourage the banks to lend less before during the period of very reckless lending – the Fed has been trying to encourage the banks to lend more, to no avail in terms of the amount of lending the Fed is trying to achieve (the Fed is trying to get things back to normal).
This is a case of the waves playing themselves out in real-time, despite the best efforts of the Fed, because if one goes by Elliott waves and what position we were in in the waves in recent years, one would have expected (if one knows how the waves work) that the banks would have been overly eager to lend during 2005-2007, when we were at the height of wave B of the first big bear market correction, and nothing was going to stop that from happening, including admonishments and begging and pleading by the Fed. On the other hand, once wave C (a down wave in this case) kicked in – the credit crunch started when that wave was in the process of doing that (though most people did not become aware of the wave until over a year later, when the crash part of wave 1 of C hit) – banks cut way down on their lending and were, from then on, more interested in preserving capital and being conservative than in taking risks. In other words, the tables had (effectively) completely turned.
It has gotten better in recent times – as the recovery coming out of wave 1 of C has run its course – but we are still not back to normal lending and we won’t get back to that, it is the nature of the part of the cycle that we are now in. The Fed can push all it wants, that is just not going to happen. When wave 3 of C transpires, lending is going to get even tighter than it did during wave 1 – but that is a discussion for another day, we are not there yet.
My point here is simply that for the last couple of years or so, the Fed has exhorted the banks to lend more (than they have wanted to during that time) – to no avail, the banks refuse to lend as much as the Fed wants them to, choosing “prudence” and caution over what was the reckless lending they were doing before. The credit crunch continues – as one would expect once the start of wave 1 of C has transpired. The credit crunch will continue, to more or less of an extent (more again, later), for the duration of the downturn (which is only just beginning) – and there is nothing the Fed can do about it.
In Elliott wave terms, one would expect reckless lending during wave B (which is an up wave in this case) – and we got it especially strongly this time when wave B was at its height from 2005-2007, having not gotten there until then (for many years) because of how badly the waves had been distorted in the past due to the efforts by the Fed to keep the economy going indefinitely – and once wave C (down in this case) hit, which actually turned out to be a process this time (the beginning was spread out over a few months, it did not happen all at once) because of all the pushing to keep the economy going, the credit crunch started during that time and we have had curtailed lending ever since, just as one would expect during wave C down if one knows how the Elliott waves work.
That is just the way it is – and there is nothing the Fed can do about it, they have no more power to force the lenders to lend as much as they would like them to in the time since the credit crunch started than they had in the previous time from 2005-2007, the most reckless time of lending before the credit crunch started, to force the lenders then to lend less, and more prudently, than they were doing at the time.