The Fed systematically misreads its own stance because it assumes every change in the federal funds rate is caused by its actions, ignoring that the rate (a market price of reserves) shifts with the public's demand for loans: in a downturn loan demand falls, reserve demand falls, and the funds rate falls—leading the Fed to wrongly conclude it has been too easy and to drain reserves, exacerbating the slump (and the reverse in booms, adding fuel to the fire).