The Federal Reserve is wrong again

I don’t mean wrong in the sense that they have announced that the economy is recovering, but it really isn’t. Well, yes, they’re wrong in that regard too, but I have something a little more specific and immediately verifiable in mind:

The Fed’s forecasts, released as part of the minutes from its April meeting, show that its staff now expects the unemployment rate to rise to between 9.2% and 9.6% this year. The central bank had forecast in January that the jobless rate would be in a range of 8.5% to 8.8%, but the unemployment rate topped that in April, hitting 8.9%.

Mish notes the fact of two Fed forecasts, one in January and one in May. Each declared a maximum U-3 unemployment rate, first 8.8 percent, then 9.6 percent. Today, the BLS announced that U-3 unemployment hit 9.8 percent, with U-6 unemployment at 17 percent.

Note that the Fed’s vast team of academic economists armed with PhDs can’t get to within 98 percent precision in two tries, the latter only four months out, while I was able to forecast U.S. housing prices at 99.3 percent accuracy eleven months in advance. (The mid-range of their nine-month forecast was only at the 88.8 percent level!) Now, bearing in mind that I have absolutely no idea what the price of money or the size of the money supply should be, why in the name of the netherest nether Hell should anyone believe that they do?

Reading List

1. We are Doomed by John Derbyshire

2. Ilium by Dan Simmons

3. Cool It by Bjorn Lomborg


End the Fed by Ron Paul: 10/10. I’ll be reviewing this in more detail soon and have requested an interview with him. A fascinating book; it significantly surpassed my expectations.

The Empire series by Conn Iggulden: 6/10. Lightly alternative historical mind candy. It was entertaining enough and the man clearly did his homework, but I still don’t see the point of trying to turn Brutus and Caesar into David and Jonathan just to get a bit more dramatic bang out of that final “et tu, Brutus?” The relationship was never really convincing and it weakened Caesar’s character significantly. Caesar winds up coming off a bit schizophrenic, as Iggulden is forced to juggle between portraying the historical Caesar capable of his astounding actions and the kinder, gentler romantic that Iggulden wants him to be in order to serve the story. Brutus, on the other hand, would be convincing if only he wasn’t the bestest blade in the West… I mean, Rome.

The Painter of Battles by Arturo Perez Reverte: 8/10. A brutal book by a very good writer. Introspective and sparse, it paints an intriguing portrait of the narcissistic and unintentional evil of the compartmentalized intellectual. Shows definite flashes of greatness which are countered by occasional periods of textual tedium. The sort of book that leaves you staring at the ceiling afterward, contemplating Man’s capacity for pointless depravity.

The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics by Michael Shermer: 7/10. I reviewed it at WorldNetDaily.

After the storm, or eye of it?

The Economist assumes the former. The facts suggest the latter:

Despite a welcome return to growth, the world economy is far from returning to “normal” activity. Unemployment is still rising and much manufacturing capacity remains idle. Many of the sources of today’s growth are temporary and precarious. The rebuilding of inventories will not boost firms’ output for long. Across the globe spending is being driven by government largesse, not animal spirits. Massive fiscal and monetary stimulus is cushioning the damage to households’ and banks’ balance-sheets, but the underlying problems remain.

Auto sales collapsed to the level of previous lows as soon as the government funding was withdrawn. The same thing is going to happen to the rest of the economy, especially since most of the recorded “growth” in GDP is actually the result of a decline in imported goods sold. In the second quarter, the $71.2 billion fall in imports contributed more to GDP than the $41.4 billion increase in government spending.