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The US economy and its financial system operate under the implicit belief that the Federal Reserve controls the direction of the economy and finance. This belief isn’t in Fed influence, it’s in Fed control: the Fed can reverse a stock market decline on a dime, it can reverse a recession, it can do “whatever it takes” to keep markets stable and expansive.Every new Fed policy extreme generates second order effects which unleash unintended consequences. The prime example is moral hazard, the belief that risk can be taken on to boost speculative gains without suffering any consequences of that risk blowing up.But what if the Fed is unable to push policies to new extremes due to systemic constraints? What if policies that worked like magic before no longer work this time around due to diminishing returns / collapse of buffers?What if the Fed cannot reverse the doom-loop of second order effects its previous policy extremes have generated? These outcomes don’t seem farfetched to anyone who studies systems dynamics. Rather, they seem inevitable and predictable.What if the Fed has already lost control but nobody dares question the confidence in Fed omnipotence? It’s not the Fed policy extremes that work the magic, after all; it’s the confidence of participants that resolves the bubble bursting crisis.