Happy weekend all! It's a beautiful day for another fabulous Fed food-fight!
Posted on 08/16/2015 6:02:38 AM PDT by expat_panama
One of the most curiously persistent surrealisms of Washington, DC is the reflexive deference given the Federal Reserve System. The Washington elite tends to accord more infallibility to the Fed than do Catholics the Pope....
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The big question is whether Fed officials can get it right after years in which they have regularly predicted a stronger economy than the one that materialized...
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...let’s be blunt. If NASA suffered from comparable inaccuracy the manned spaceflight program would have been shut down by an endless series of Challenger-type catastrophes many years ago. With forecasts this bad is it any wonder the American economy continually crashes and burns?...
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[M]acro-economics is now [astrology’s] modern incarnation: Only instead of stars, macro-economists look at “aggregates” gathered religiously ...
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...criticism, while apparently alien to the Fed, is nothing new. Hayek, in his Nobel Prize acceptance speech The Pretence of Knowledge tartly observed: We have indeed at the moment little cause for pride...
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Thus it falls to me, in my role as the simpleton on this beat, to declare: The Emperor has no clothes...
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If clad, high time to parade its exceptional beauty. Pass the Centennial Monetary Commission. Let’s see the Emperor’s clothes.
(Excerpt) Read more at forbes.com ...
The Fed is not always wrong.
But its central premise, its operating system if you will, IS wrong and will bring us down - eventually.
That central premise is that debt can function as money - true, in part - AND THAT DEBT CAN BE EXPONENTIALLY EXPANDED, AND SERVE AS AN ASSET TO ITS ISSUERS.
We see now the storm on the horizon. Still tiny, but inevitable.
Happy weekend all! It's a beautiful day for another fabulous Fed food-fight!
Actually, the Fed's central premise is the constitutional (Art. I, Sect. 8) requirement to fulfill congress' obligation to "...coin Money, regulate the Value thereof... " and the thing about money being created by banks loaning money is something banks have been doing for hundreds if not thousands of years. It's what money is.
Actually, with the exception of the period after WW2 when we were the only ones left with an intact industrial base, the economy has gone through all sorts of turmoil, driven by monetary bubbles.
The “Roaring ‘20s” were a monetary bubble that resulted in the crash of 1929, and we never recovered until the end of WW2. It looked good until the late 1960s, when the rest of the world had rebuilt their industry, and then we started having crises again. In the past quarter century it’s been all bubbles and recessions - tech bubble and housing bubble and now the government debt bubble, which is the last one (there’s nothing larger to blow a bubble in).
Their only solution to anything is to print money and create more debt which only makes the problems worse. Think about it - when was the last time we had a period of true prosperity which wasn’t just another bubble waiting to pop and cause widespread misery?
History shows many boom/bust cycles long before there was such a thing as the Federal Reserve.
Here are a couple.
https://en.wikipedia.org/wiki/Panic_of_1873
https://en.wikipedia.org/wiki/Panic_of_1893
So...will they raise a qtr point next month or not? I think not.
As an individual with a Ph.D. in economics, I have heard this many times over the years. It highlights how difficult it is for economists to agree on policy decisions because there are so many ways to view things that impact the economy. As I recall, the hot macro study topic back then was the St. Louis Federal Reserve Model, which attempted to solve 114 simultaneous equations. I'm sure today's models are even more complex. Still, the main fly in the ointment is that they try to predict human behavior, not just for the US economy, but for the increasingly integrated World Economy. Personally, I lean towards Friedman's view of Monetary Policy which ties monetary policy to real changes in GDP and involves much less tinkering than current policy. Indeed, it is much less subject to the political pressures of today. At least that would lead to expectations on the part of business that would be more predictable than it is now, and that can't be a bad thing.
My hunch, and it’s just that, is that they will boost 1/4 point. It’s “expected” of them, and if they don’t, they’ll lose credibility.
It’s been ‘expected’ for years now. Quarter by quarter, many of them. During the usual 2nd quarter rebound it gets repeated “The Fed will raise a quarter point at the September or December meeting.”
Hasn’t happened yet.
The U.S. economy also grew dramatically from its founding up until the creation of the Fed.
“It’s a beautiful day for another fabulous Fed food-fight! “
It’s either that or enter into the virtues of The Donald fray. Hmmm...decisions decisions.
Exactly and the record speaks for itself. While the past century's been mostly expansion with temporary downturns, the previous was the other way around w/ mostly downturns w/ momentary expansions..
Still, having the Fed in 1913 didn't make all that much difference. What made us better off were fed policies like losing the gold standard and separating monetary policy. Since WWII not only have dollar prices have been far more stable but both econ production and employment's said goodbye to the regular severe downturn everyone's forgotten.
lol! Yeah, I’m amazed (tho I really shouldn’t be) at all the freepers in love w/ Trumps tax hikes and expanding gov’t.
Yeah, I'm remembering my Phd Econ1A prof complaining how everyone thot they knew more than them that actually studied it. After I graduated I noticed that his gripes overlooked the fact that he really wasn't alone, that doctors, lawyers & engineers etc all have to put up w/ a world full of self-anointed experts.
I lean towards Friedman's view of Monetary Policy which ties monetary policy to real changes in GDP...
Now that's always puzzled me because while most people do think that way it just doesn't seem right. Seems it would make a heck of a lot more sense to tie monetary policy to prices and not production. imho we should be tracking monetary decisions on say the PCE and leave production to the producers. Maybe then would once and for all trash that loopy Phillips Curve nonsense.
Who has forgotten severe downturns? We’re in the same one that started with the collapse of the Fed-fueled housing bubble, and not only have we not recovered from it, but we’re about to go into a whole new phase.
Just FYI the dollar has lost 98% of its purchasing power since the Fed got a hold of it; that cannot be considered to be stable by any reasonable definition of the term.
The curve smoothing comes with a price, and the price is increasingly large bubbles - until there are no more bubbles that can be blown and the entire system collapses catastrophically.
We’re there now. Zero percent interest rates for years and still the economy is stalled, still unemployment is through the roof and GDP is negative. This is the endgame of a slow-burn Ponzi scheme.
Who has forgotten severe downturns? We’re in the same one that started with the collapse of the Fed-fueled housing bubble
Ah, somehow I'd thot we were all looking at BLS numbers for employment and the BEA's figs for gdp. Agreed, by basing trend views on say, shadowstats etc. we can easily come down to an inescapable conclusion that everything bad's come from the Fed.
Official BLS and GDP numbers haven’t been credible in a long time.
Hey, is this a free country or what!
Given that BLS has been caught red-handed multiple times putting out completely fraudulent data, I’d say that looking for alternative metrics is completely reasonable.
The only reason people have been talking about the labor force participation rate in the past couple of years is that the official unemployment number has become so massaged and opaque as to become meaningless. Five point something official unemployment rates while 30%+ of prime-working-age Americans are not working is pretty much a flat-out lie.
What explains a decade worth of stagnant wages better, the historically low unemployment number or the historically high labor force participation number?
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