A Benjamin Cole post
It is getting harder and harder to keep a straight face and say the U.S. Federal Reserve should tighten money.
From the Atlanta Fed:
“The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 was 0.7 percent on August 13, down from 0.9 percent on August 6. The previously reported nowcast of 1.0 percent for August 6 was revised down due to a minor adjustment in the method for nowcasting investment in computers and peripherals. Since a week ago, the nowcast for the contribution of inventory investment to third-quarter real GDP growth has declined from -1.8 percentage points to -2.2 percentage points. This decline more than offset an increase in the nowcast of the third-quarter growth rate in real consumer spending from 2.9 percent to 3.1 percent after the release of this morning’s retail sales report from the U.S. Census Bureau.”
So, let’s see, Q1 was dead, and Q3 will be dead, in terms of real GDP growth. And Q2 would have been tossed back into the water in most of the 1990s.
But Janet Yellen and the Fed are still talking about those rate hikes. They sound like a crack-head discussing the next coke fix—there is no other topic in the room.
I have a really bad feeling that what the Fed should be discussing is QE and wiping out IOER. But they can’t. It would not be PC. The Fed is trapped appeasing the utopian monetary dogmas of partisan-eccentrics, and by its own institutional hubris and rigidities.
The Fed cannot say what it should say, which is, “Man, we have been wrong, over and over and over again. The economy is weaker than we forecast, again. Ergo, we are going to gun the presses good and hard for a real long time. Way longer than ever before. Screw our forecasters, they are obviously biased.”
You will never hear a speech like that from the Fed.
Dudes, this could get ugly.