Thursday, January 26, 2012

Fed Press Conference 1/25/2012

Below is the video from the Fed press conference the other day; it is very disappointing as far as the Fed's outlook on employment.  They have basically given up on achieving what MMT would consider full employment with price stability.

Here is a link to the transcript and some excerpts related to their view on their lawful mandate of "maximum employment with stable prices".


 With respect to the objective of price stability, it is essential to recognize that the inflation rate over the longer-run is primarily determined by monetary policy, [Ed: Then this should directly open the door to the MMT JG since the JG is NOT part of Monetary Policy and therefore is NOT inflationary; Thanks Ben!]
 and hence, the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer-run with our statutory mandate. Over time, a higher inflation rate would reduce the public's ability to make accurate, longer term economic and financial decisions, whereas the lower inflation rate would be associated with an elevated probability of falling into deflation which can lead to significant economic problems. Clearly communicating to the public,  this 2 percent goal for inflation over the longer-run should help foster price stability and moderate long-term interest rates. It will enhance the Committee's ability to promote maximum employment in the face of significant economic disturbances. [Ed: What "economic disturbances" have there been in now over 3 years?  What is he even talking about?]
Maximum employment stands on an equal footing with price stability as an objective of monetary policy. The difference with the price stability is that the maximum level of employment in a given economy is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market, including demographic trends, the pace of technological innovation, and a variety of other influences including a range of economic policies. Because monetary policy does not determine the maximum level of employment that the economy can sustain in the longer term, and since many of the determinants of maximum employment may change over time or may not be directly measurable, it is not feasible for any central bank to specify a fixed goal for the longer-run level of employment. [Ed: They have thrown in the towel on unemployment and they all should be fired.]
Although the Committee cannot freely choose a longer run goal for employment, it can estimate the level of maximum employment and use that estimate to inform those policy decisions. The Committee considers a wide range of indicators of making these assessments of maximum employment, recognizing that such assessments are necessarily uncertain and subject to revision over time. For example, in the latest set of projections that have been distributed to you, Committee participants' estimates of the longer-run, normal rate of unemployment have a central tendency of 5.2 percent to 6.0 percent, roughly unchanged from last January, but higher than the corresponding interval several years ago. [Ed:  With no rationale provided for the revisions to their "latest projections", it becomes obvious that they are pulling these so-called "normal" rates of unemployment straight out of their ass.]
 As I noted, the level of maximum employment is not immutable. In particular, it could be increased by effective policy such as education and training that improve workforce skills. If the Committee's assessments pointed to an increase in the maximum attainable level of employment, our policy strategy would be modified appropriately to aim at the higher level. [Ed: Now they indicate that they are accepting of current levels of millions of unemployed citizens as somehow "normal" due to a lack of education?  They are all deranged, insane and dangerous people.]
That's enough.

Everyone there is a moron and should be removed from their positions immediately.

They are absolute failures at fulfilling their lawful mandate or articulating the reasons why they cannot succeed. They have given up without admitting it. All of them should be fired and be prevented from holding any sort of public economic policy positions in the future.

The Fed is a disgrace.


Anonymous said...

c'mon Matt, don't sit on the fence :)


Matt Franko said...


Warren takes a pretty good swing at them today in his CNBC piece; but it reads to me like Warren thinks they know more than they are saying... and for some unknown reason (politics?) they dont set things straight.

I think they really dont know what is going on, hence "morons".

They have some sort of quantitative cognition deficiency whereby they cant see what is really going on... they are more "rules based" rather than "intuitive" in their approach to mathematics/quantitative systems.

So without the "intuition" and the reliance on a set of "rules" it is hard if not impossible for them to break out of the current false dogmas that have taken over the academy of economics, as they set "the rules".

If you do not possess the innate "intuition", it is hard to be a skeptic and be able to break out of it.

They just dont have it, time for them to go and bring in a new team.


Tom Hickey said...

Actually, I take this as positive. Bernanke wants the Fed's mandate changed to reflect the impotence of monetary policy to affect unemployment. This is rightly a fiscal issue, and the how and why needs to be explained to Congress. Of course, he should be forthright and say this.

I rather doubt that Bernanke understands Post Keynesian macro or MMT, so he likely believes the fundamental principle of neoclassicism that wages need to fall in order to increase hires. No matter that another neoclassical principle is that unemployment is voluntary. If unemployment is voluntary, why would people choose work over leisure for lower wages. It's just bonkers.

Anonymous said...


it would be of great benefit if Warren does actually make the Senate, and attend the Bernanke testimonies. Only then would we be able to have a pure deabte about the mechanics of the monetary system, as opposed to a point scoring competition that achieves diddly.

I find it difficult to believe that the Fed doesn't know the operations side like the back of their hand given some of the research that comes out of there (such as on multipliers, or lack of, a couple of years back). Then again, some of the research is appalling (witness the piece done on effects of QE on markets, where they tried to hoodwink everybody and measure the change on the day, completely missing the fact that markets move way ahead of time... hmm).

And it also makes you think twice when you hear the likes of Fisher carry on with complete ignorance and ideology.

So I'm undecided on whether they actually "do" appreciate the operations of the system as it is, but am adamant they "should".

Look, the US is a severely divided country in terms of income, with corporations and government increasingly intertwined. So you wonder if "public purpose" is actually the basis for government there (and elsewhere). pretty sad really.


Matt Franko said...


I think Warren's contacts at the Fed are at some of the lower operational levels and I would have to agree w/ you here that those folks probably know what is going on...

But, Fisher, Bernanke, etc.. those at the BoG level, FOMC level, I believe they dont know what is going on.

So when Warren says they should tell us the truth I think at the BoG/FOMC levels they dont know what he is even talking about.... these incompetent high level morons are the ones we need to specifically call out.

They cannot visualize the true operations of these systems so they fall back on "the rules" that they learned/taught in academia: taxpayer on the hook, hard stops on debt to gdp ratios, inflation is a monetary phenom, etc....

They dont have the ability to think intuitively. We suffer for it.

Look if this was an NFL football team and the Fed was the coaching staff the owners would have fired them LAST year. The "game" the Fed is involved in has much higher and real consequences than US football.


Ryan Harris said...

I'd like to see someone appointed to a top economic position, like the fed chairman, that did NOT attend Harvard, Yale, Princeton or Columbia. These schools ideas and neo-classic models have failed so miserably for several decades that we need fresh thinking. Cleaning some cobwebs and totems from the dusty crony filled ivy league posts. Virtually every single economic position has been filled by people educated at these 4 institutions for decades. Diversity of thought has value.

Dan Kervick said...

Actually, I take this as positive. Bernanke wants the Fed's mandate changed to reflect the impotence of monetary policy to affect unemployment.

Absolutely correct, Tom. Bernanke realizes, even if his brethren in the economics profession do not, that central banks cannot do anything about employment through what is conventionally called "monetary policy." The money multiplier is a myth; the demand for credit drives the demand for additional reserves, not the other way around.

Government certainly can boost economic activity and employment by relying on its role as a direct supplier of net financial assets. But to do that, government needs to spend the money directly into the real economy for both production and consumption. The Fed can't do that. All it can do is trade financial assets with the financial sector to jigger with interest rates.

Matt Franko said...


Then why doesnt he say so?

If that is what he is trying to do then this is some pretty weak sauce he is serving here....

He reiterates the Friedman thing that Monetary Policy is the only driver of inflation: that is certainly not heterodox.

Then he blames the current high unemployment on lack of education or something? Whaaaaat? And then he seems to say that if we got more education, then they could be more accomodative????? HOW??? You have been at 0% for 3 fing years moron Bernanke? So if we all go back to school what is he going to do then? More circle jerk QE? These people are MORONS Dan.

The only mention he makes of fiscal policy is based on 'taxpayer on the hook', and a hard stop on debt:GDP ratio a la R&R...

They all have to go...


Matt Franko said...

Look Dan,

He says here: " If the Committee's assessments pointed to an increase in the maximum attainable level of employment, our policy strategy would be modified appropriately to aim at the higher level."

He says he could do more if we all were better educated. What is he going to do? "aim at the higher level" wtf is that? He is not saying that they are powerless. He is saying that they could do more if we were better educated.

Then the morons in Congress believe the problem is education.

I do NOT see what you and Tom are saying here. Bernanke is hopeless.


Matt Franko said...

And another thing,

this is a really, really condescending attitude he is taking here.

He blames the unemployment on our education levels... how ironic is that! If we were just all smarter then we could get more employment????

This is elitist.


Tom Hickey said...

@ Matt

It's the belief that UE over the "natural rate" is due to structural UE rather than cyclical. He thinks that the manufacturing jobs have left for good, so now workers formerly employed in manufacturing have to be re-assigned and that requires different knowledge and skills, hence the need for training. I think that this presumption is pretty general in the mainstream.

Dan Kervick said...

I believe there have been several studies done over the past few years to determine what percentage of unemployment is due to structural factors - skills mismatch due to failures of the education system - and what percentage is simply due to a recession-induced fall in aggregate demand. And not surprisingly, the bulk is due to the recession.

And yes, you would think Bernanke understands that unemployment did not soar after 2008 because Americans suddenly got less educated.

However, the key thing here is that he is saying that the Fed cannot do much to boost employment. Only additional public spending can do that. He's calling for more spending on education. But he could also just call for more tax cuts, or call for more infrastructure spending, etc. Whatever he has to say to get the derelict Congress to act, I'm for it.

His message for the past several months has been, "That's it. The Fed is on strike. We've already exhausted the things we can do, and they didn't do much. The Fed can't bail out the economy with monetary "accommodation" or "loosening" or "expectations management" anyway. That's all smoke and mirrors dreamed up by fiscal conservatives who don't want the public sector to spend anything ever and who think the Fed runs the economy. Well, I'm sitting here at the Fed and I can tell you that what we do doesn't really matter much."

Why doesn't he say more. Because he is supposed to be "independent" which means not taking sides in raging political wars. You have to read between the lines. He can't go before Congress and say, "The Republicans are wrong ... You guys need to spend a lot more money!" But I think that is what he has been saying out of the side of his mouth now for some time.

He also can't go before Congress and say, "The Fed is out of bullets", even if he thinks the Fed is out of bullets. Every Bozo on CNBC would then take to the floor of the exchanges they cover and start scearming, "OH MY GOD! The Fed is OUT OF BULLETS!" I don't know what that means but it sounds bad. Unfortunately Bernanke has to engage in a certain amount of moron management.

All of the obsession with the Fed, now from Carney too, is beside the point. The job of the Fed should not be to act like some economy czar who tells Congress what to do. He's just a damn banker running the banker's bank. It's not Economy Command Central.

Matt Franko said...

All good points Dan and Tom.....

We're screwed!