THE DISMAL FED SCIENCE
I’ve long asserted that Ben Bernanke is misinterpreting the cause of the current economic malaise, but based on the latest FOMC Minutes you might begin to wonder if anyone knows what’s going on at the Fed?
“Participants generally agreed that the most likely economic outcome would be a gradual pickup in growth with slow progress toward maximum employment. They also generally expected that inflation would remain, for some time, below levels the Committee considers most consistent, over the longer run, with maximum employment and price stability. However, participants held a range of views about the risks to that outlook. Most saw the risks to growth as broadly balanced, but many saw the risks as tilted to the downside. Similarly, a majority saw the risks to inflation as balanced; some, however, saw downside risks predominating while a couple saw inflation risks as tilted to the upside.”
And Fed policy is primarily to build confidence (“expectations”)?
Hmmm. Something missing here.
No confidence built with that statement.
“We think growth (or inflation) will be x but it could be higher or lower”
Sure am glad these guys are running things.
Can you imagine what kind of comments Sen. Ron Paul could make from those minutes? At the very least, it would be entertaining.
Thread that needle baby.
I Recall the early days of my “quasi” online day trading. The market basically froze when Greenspan was about to speak. He seem to have this mystic presence on the market. Now with the benefit of hindsight and internet forums like this one, I can see what a Kabuki dance it really is/was. Sad…
The only thing that comes to mind when I read the quoted paragraph is “deer in the headlights”.
The cause of the current economic malaise is an over-leveraged consumer – the Fed can’t figure this out?!? They figured it out for the banks when they were all leveraged 40, 50 to 1 and were thereafter de-leveraged by receiving free handouts. De-leveraged the rest of us!! Then things will all go back to hunky-dory. Oh…wait…they can’t do that…that would end up putting the hurt BACK on the banks, wouldn’t it? I wonder, what would happen if those banks went under. Would it really be all fire and brimstone like they say?
Isn’t it crazy? If you read all of BB’s work on the depression he truly believes that it was almost entirely due to the banking sector. So, he says we’re in a similar crisis. So what does he do? He tries to fix the banks. It’s supply side to him. Monetarism 101. What he doesn’t understand (or is only just perhaps beginning to understand) is that this is a household crisis.
Jesus, I’ve been writing that line for almost three years now. I want to rip my hair out…..
Stephanie has it right. De-leverage the real US economy. Should be the poster for PragCap
From Ben himself, on why the GD happened:
http://www.youtube.com/watch?v=39AZj2z-g6I&t=0m15s
0:15 to 0:44
1) The Fed let the money supply contract
2) The Fed let the banks fail
It’s the running loop he’s been telling himself all this time.
“Most saw the risks to growth as broadly balanced, but many saw the risks as tilted to the downside. Similarly, a majority saw the risks to inflation as balanced; some, however, saw downside risks predominating while a couple saw inflation risks as tilted to the upside.”
still need to read it several times to figure out what’s going on at those meetings…
That statement sounds very much like a weather report. Today, here in MI we have a 50% chance of snow. It will be sunny but we could see some clouds roll in.
WTF