Federal Reserve Admits it Never Knew What it was Doing
The Federal Reserve is, at last, acknowledging at top levels that its economists are completely baffled, its recovery is failing, that the Fed cannot raise interest and may even have to heat up its stimulants … or we may end up with a permanently scarred and stagnant economy.
Federal Reserve bank president expresses deep reservations about Fed’s recovery
Last week, Boston Federal Reserve President Eric Rosengren opened a meeting with Fed Chair Janet Yellen with the following statements:
He said the “nonconformist” behavior of the economy remains a challenge for policymakers trying to determine whether low growth and low inflation are now a permanent state of affairs…. It could mean the country’s economic performance has changed for good. Policymakers are trying to determine “whether firms and households have changed behavior in ways that are likely to be more permanent than transitory, whether slow growth in productivity is transitory or permanent, and whether recent trends in personal saving behavior are likely to persist well into the future,” Rosengren said. The answers will shape whether officials at the Fed and other central banks … will have to keep nontraditional tools in hand and be prepared “to address any emerging risks to the current recovery.” The fact that 10 year Treasury yields remain near or below zero on an inflation-adjusted basis, Rosengren said, “suggests a lack of confidence in U.S. and global growth prospects, and in the ability of policy authorities to offset weak growth.” (Newsmax)
Really? You figured that out all by yourselves? Good job, guys. Yes, there is a great lack of confidence in your ability to do just about anything. Yes, your plan has created an economy that is destined to remain stagnant until it dies. Yes, the economy is “non-conformist” to regular economic principles because you have engineered a recovery that is entirely based on irregular ways of thinking and have all but eliminated free markets in anything that trades in this world with your infinite ability to create meaningless money to pump into those markets. Therefore, the market of everything follows the Fed, rather than conforming to normal economically based decisions, because the Fed IS the economy now.
And all of this is a “challenge” for you because you haven’t got a clue as to what genie it is you let out of the bottle. And, yes, it does mean the country’s economic performance has changed for good or, at least, until your experiment in alchemy blows up so we can get back to real economics. Until then, the economy is destined to endless life support in order to remain comatose on the operating table.
We’re all glad you’re finally starting to see the shape of things to come. You are worse than the old-world alchemists who tried to make gold out of baser metals. You try to make money out of nothing and then pretend it has value, even as you create near-infinite amounts (trillions of dollars) of it. And, then, you believe the nothing you have puffed up with your hot air can create enduring productivity and wealth throughout the nation.
Clearly, your centrally planned economy is not running quite well as you would like or as you puppets of mastermind Ben Break-the-Banky thought it would, or you wouldn’t be talking about how it is not conforming to the ways you thought it would go after all of your quantitative wheezing and free loans. Once you finish figuring out why your plans aren’t working, if you need any arsenic for yourselves, I’m sure you can find plenty of people who will help you get ahold of some.
Yellen said sluggish worldwide growth will likely keep global interest rates low, making it harder for central banks to combat the next recession with rate cuts.
Umm. Yeah. There was no surprise in that here. I predicted a year ago that you would raise interest rates in December of 2015 for the first time in years because you were feeling great pressure to prove you could do it that year in order to show your recovery would hold. At the same time, I predicted that it wouldn’t hold and that you would become paralyzed and unable to raise interest rates again after that.
I said that things would start to fall apart so badly in 2016 that even you would be able to figure out that raising rates a second time would certainly finish off your fantasy recovery. (It only exists on the high fumes of low interest that you keep breathing into its lungs in the form of nearly free loans.) Clearly, you don’t call as many top-level, back-to-back emergency meetings as you did in the first part of this year unless something has gone seriously awry.
So, I venture to say that things looked quite dire and that you found a secret way in your closed-door, emergency summits to patch the economy along through the election cycle; but your comments below indicate you don’t think the fix will hold much longer. Your own comments make it clear enough that things have turned out so badly you are now forced by circumstances to prepare the general public and the business world for the possibility that the economy may have to run on near-zero interest for a very long time to come.