Fed News Friday: Federal Reserve Revises Outlook From Bad to Worse; Top Obama Economist Suggests Fed Should Forget Stabilizing PricesNovember 5th, 2011
While noting that economic growth strengthened “somewhat” in the third quarter earlier this week, the Federal Reserve also significantly revised its economic outlook for the next three years, raising previous projections from this summer for inflation and unemployment to come, while slashing previous projections for GDP growth. The Federal Open Market Committee wrote in a press release Wednesday:
“Information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated.”
But setting aside the press release for a second, ZeroHedge has the numbers:
* FED OFFICIALS SEE 2011 GDP 1.6%-1.7% VS 2.7%-2.9%
* FED OFFICIALS SEE 2012 GDP 2.5%-2.9% VS 3.3%-3.7%
* FED OFFICIALS SEE LONGER-RUN GDP 2.4%-2.7% VS 2.5%-2.8%
* FED OFFICIALS SEE 2011 UNEMPLOYMENT 9.0%-9.1% VS 8.6%-8.9%
* FED OFFICIALS SEE 2012 JOBLESS ESTIMATE 8.5%-8.7% VS 7.8%-8.2%
* FED OFFICIALS SEE 2013 JOBLESS ESTIMATE 7.8%-8.2% VS 7.0%-7.5%
* FED OFFICIALS SEE LONGER-RUN JOBLESS 5.2%-6.0% VS 5.2%-5.6%
So to read that properly: in June, the Federal Reserve projected the total growth in GDP for 2011 at 2.7%-2.9%. Now it is projecting 1.6%-1.7% growth in GDP for 2011. Back in June, the Fed was projecting total unemployment for 2011 to be 8.6%-8.9%. Well the numbers came in and now they’re saying it will probably be more like 9.0%-9.1%. Oops.
The real cool thing about it is that after a century of monetary “stimulus” via the printing press, and most recently after mathematically insane levels of such stimulus in ten short years (just Google “Adjusted Monetary Base St. Louis Federal Reserve”), we haven’t been able to print ourselves out of economic misery, and yet (and this is the cool part) the “luminaries” of the Federal Reserve will still interpret this downgrade in the economic outlook as evidence that we haven’t printed enough! They’ll say it with a straight face. I’m starting to wonder if some of them might actually, really believe it.
Take for instance, Christina Romer the Obama Administration’s former top economist. This Sunday she actually argued that the Fed should not only keep the presses running at full speed to spur economic growth via an expanding supply of fiat credit, but that it should pursue this policy so aggressively as to abandon one of its two traditional mandates– stabilizing prices– in favor of a new mandate: a targeted level of GDP growth, and that it should run the printing presses into the ground to get us there each year, inflationary fears be damned. In fact, Romer not only doesn’t fear inflation, but seems to want to institutionalize it, to aggressively pursue it, to make inflation the policy of the Federal Reserve if only it will help drive up nominal GDP.
Is the sheer insanity of such a proposition monstrously apparent, or am I a hysteric? If it is not, then certainly I must be not only hysterical, but insane myself. Commit to higher inflation? Higher than global food prices already are because of all this monetary “stimulus?” Higher than those prices will be here in America once the world abandons the dollar as its reserve currency and the game is over? Print more money to stimulate economic growth? More than the trillions it already has in less than a decade’s time and to no avail? Are we living in Atlas Shrugged times when the monstrously illogical prevails in the minds of men and a desperate government fails to salvage the wreckage it has wrought? Are we living in 1984 where War is Peace, Freedom is Slavery, Ignorance is Strength, and Printing is Productivity?
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