"the Fed’s Open Market Committee said it expected that the economy would contract by 0.5 percent to 1.3 percent this year, that unemployment would rise to 8.5 to 8.8 percent and that inflation would remain under greater pressure."
Those numbers are, of course, pure fantasy. I'll bet anyone the economy will contract by more than 1.3 percent, and that the unemployment rate will be higher than 8.8%. I'd be willing to give out 10:1 odds unemployment is higher than 8.5% at the end of the year... I guess the Fed can't say things are going to fall off a cliff, but it also loses credibility...
The 1.3 percent GDP contraction number, in retrospect, looks about right while the Fed was clearly way off on unemployment. The question I have is why the Fed, after getting worse unemployment numbers than it had ever imagined, did not change course and provide more really large stimuli...
I just read your rant about the econ profession. I guess you would categorize me as a market fundamentalist. So if you were designing a course for grad econ, what would you put on the syllabus to counter the priors of the market fundamentalists such as myself?
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ReplyDelete"The question I have is why the Fed, after getting worse unemployment numbers than it had ever imagined, did not change course and provide more really large stimuli..."
ReplyDeleteWhen Bernanke was asked about the dual mandate of the Fed, he did not mention unemployment. (!) A revealing slip, I am afraid.
"The question I have is why the Fed, after getting worse unemployment numbers than it had ever imagined, did not change course and provide more really large stimuli..."
ReplyDeleteIn the view of a right-winger like Bernanke, the Fed's job is (a) to protect Wall St, and (b) prevent an actual second Great Depression. And most of (b) is only because it'd impac negatively on (a).
He's quite happy with a high unemployment rate, as long as banks can make money.