Federal Reserve Lowers 2013 Growth Estimate Eight Times!
Lost in the announcement that the FederalReserve would not slow the rate of its $85 billion a month bond-buying, money printing, was the fact that the Open Market Committee lowered its growth forecast for the eighth time.
For four years the Fed has been expecting GDP growth to accelerate to at least 3 percent.
The Fed, by Bernanke’s own admission has not understood the full measure of the harm the financial crisis and the recession have done to the economy.
The Fed is not to be faulted for not having perfect – or even very good – vision of conditions to come. But it is to be faulted for the conceit that it can interfere with the meaningful and information-laden signals of real interest rates in the marketplace, replacing them with contrived and therefore misleading rates.
The Fed thereby forestalls the real adjustments the economy needs to restore its resilience. At the same time it continues to deceive actors in the economy about the real conditions of consumer well-being and the capital markets. The malinvestments resulting from these bogus signals will themselves eventually need to be liquidated at great cost, no less than the malinvestments of the dot.com bubble or the real estate bubble.