The Fed Always Thinks That Unemployment’s Not a Problem
A couple of our gentle Bears have suggested that I repost this over here. Ask and ye shall receive. It’s a good complement to and demonstration of the point I tried to make in my last post.
From Mike Konczal:
Their model is obviously telling them that whatever (non-)actions they’re taking at the moment will solve the problem.
And their model is obviously, consistently, and wildly wrong — and always wrong in the same direction.
Altering that model to accurately predict unemployment, of course, would require that they allow more inflation in order to address both of their mandates.
And higher inflation utterly slams the real wealth of creditors.
And the Fed is run by creditors.
Since the Fed consistenty ignores one of the mandates it has recieved to justify its existance that the time has come to agree with Ron Paul that this version of the Fed needs to be eliminated and replaced by a different version. We have had several national banks over the life of the United States. This would merely be an instance of creative destruction to produce a more useful version of the institution.
Steve
they don’t even have to be corrupt. when everyone you know is a creditor, it’s “obvious” that fighting inflation is more important than reducing unemployment. after all, we know that the unemployed are only holding out for more money.
Thanks Steve,
When I was looking at your site this was, to me, the most fascinating post you had up. I am amazed that the ‘best and brightest’ can be consistantly wrong for so long.And this is just the last few years. I bet if you went back further the results would not change…
ISlam will change
This is truly a problem. Having a Central Bank that behaves this way has awful consequences.
It would be instructive to see data from earlier recessions to see whether their predictions were any better back then. The fed were certainly not the only people to not realize early on that the “Great Recession,” is an altogether different beast than earlier post-war recessions. Kind of like smelling something burning in a restauraunt. Nine times out of ten it is just some food in the kitchen and if you get up immediately and leave you’ll be accused of trying to skip out on the check. But if it IS a real fire you’d better have left five minutes ago. So behavior in emergencies is pretty common. At first people are far too calm. They notice something is wrong, but everybody is waiting for somebody else to act. Until the emergency is obvious and un-deniable, and then panic sets in.
It would be instructive to see data from earlier recessions to see whether their predictions were any better back then. The fed were certainly not the only people to not realize early on that the “Great Recession,” is an altogether different beast than earlier post-war recessions. Kind of like smelling something burning in a restauraunt. Nine times out of ten it is just some food in the kitchen and if you get up immediately and leave you’ll be accused of trying to skip out on the check. But if it IS a real fire you’d better have left five minutes ago. So behavior in emergencies is pretty common. At first people are far too calm. They notice something is wrong, but everybody is waiting for somebody else to act. Until the emergency is obvious and un-deniable, and then panic sets in.
It would be instructive to see data from earlier recessions to see whether their predictions were any better back then. The fed were certainly not the only people to not realize early on that the “Great Recession,” is an altogether different beast than earlier post-war recessions. Kind of like smelling something burning in a restauraunt. Nine times out of ten it is just some food in the kitchen and if you get up immediately and leave you’ll be accused of trying to skip out on the check. But if it IS a real fire you’d better have left five minutes ago. So behavior in emergencies is pretty common. At first people are far too calm. They notice something is wrong, but everybody is waiting for somebody else to act. Until the emergency is obvious and un-deniable, and then panic sets in.
It would be instructive to see data from earlier recessions to see whether their predictions were any better back then. The fed were certainly not the only people to not realize early on that the “Great Recession,” is an altogether different beast than earlier post-war recessions. Kind of like smelling something burning in a restauraunt. Nine times out of ten it is just some food in the kitchen and if you get up immediately and leave you’ll be accused of trying to skip out on the check. But if it IS a real fire you’d better have left five minutes ago. So behavior in emergencies is pretty common. At first people are far too calm. They notice something is wrong, but everybody is waiting for somebody else to act. Until the emergency is obvious and un-deniable, and then panic sets in.
It would be instructive to see data from earlier recessions to see whether their predictions were any better back then. The fed were certainly not the only people to not realize early on that the “Great Recession,” is an altogether different beast than earlier post-war recessions. Kind of like smelling something burning in a restauraunt. Nine times out of ten it is just some food in the kitchen and if you get up immediately and leave you’ll be accused of trying to skip out on the check. But if it IS a real fire you’d better have left five minutes ago. So behavior in emergencies is pretty common. At first people are far too calm. They notice something is wrong, but everybody is waiting for somebody else to act. Until the emergency is obvious and un-deniable, and then panic sets in.
It would be instructive to see data from earlier recessions to see whether their predictions were any better back then. The fed were certainly not the only people to not realize early on that the “Great Recession,” is an altogether different beast than earlier post-war recessions. Kind of like smelling something burning in a restauraunt. Nine times out of ten it is just some food in the kitchen and if you get up immediately and leave you’ll be accused of trying to skip out on the check. But if it IS a real fire you’d better have left five minutes ago. So behavior in emergencies is pretty common. At first people are far too calm. They notice something is wrong, but everybody is waiting for somebody else to act. Until the emergency is obvious and un-deniable, and then panic sets in.
mike
maybe the answer is to just let the Fed manage inflatioin while the congress uses fiscal policy to manage “unemployment.”
The record is very clear. Recession involving a severe credit contraction will be deeper, and recovery will be slower, than other recessions. Recession that is widespread among countries will be deeper and recovery will be slower than other recessions. There really isn’t any controversy about this. How, then, can anybody – ’cause the Fed is not alone in being overly optimistic – justify forecasts of a “V-shaped” recovery or even forecasts of trend-like growth during the recovery. A decade of poor performance is fairly common after a massive credit crunch and asset collapse.
So while Jim A has accurately (and repeatedly) characterized the behavior we have seen, there is no real excuse. We can see into the kitchen. We could see all those assets and banks being burnt to crunch credit crisps.
I remember reading a little while that the FED is not a part of the US government, it is in fact owned by a consortium of international banks. That really upsets me because it is in actuallity a ‘Foreign Entity’ !!