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Can the Post Find Any Pessimistic (i.e. realistic) Economists to Comment on the Fed?
The economists commenting in the Post on the Fed's latest decisions on interest rates seem convinced that everything is just fine. One of them, Kurt Karl, chief economist for Swiss Re, is quoted as saying: "If you were doing a progress report and had milestones every six weeks, they are right on target. ... There's no need to change their game."
Actually, the economy is not following the Fed's target. They had projected that unemployment rate in the fourth quarter of the year would average 8.9 percent. It's already at 9.4 percent and clearly will be much higher by the 4th quarter. That is about as far from the target as the Fed could plausible be.
It is understandable that the Post would want to include some wildly optimistic comments, since these represent the mainstream of the economics profession. However, it would also be useful to include some from economists who are not known primarily for how wrong they have been about the economy.
--Dean Baker
COMMENTS (3)
Is the target of the Fed over 1% deflation, as we had in May? Bernanke said he would bring down the yield on long-term Treasuries directly by open-market operations - is that effort on target? It's not a question of whether they have any need to change their game, it's whether they have the ability to do anything more. They shot all their arrows with little or no effect, but the mass of economists still have faith in the the magic of monetary policy.
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