Among the many evils of monetary central planning is the conceit that 12 members of the FOMC can tweak the performance of a $17 trillion economy on virtually a month to month basis – using the crude tools of interest rate pegging and word cloud emissions (i.e. ‘verbal guidance’). Read the FOMC meeting minutes or the actual transcripts (with a five-year release lag) and they sound like an economic weather report. Unlike the TV weatherman, however, our monetary politburo actually endeavors to change the economic climate for the period immediately ahead.
Accordingly, the Fed is pre-occupied with utterly transient and frequently revised-away monthly release data on retail sales, housing starts, auto production, business investment, employment and inflation. But its always about the latest ticks in the data – never about the larger patterns and the deeper longer-term trends.
And of course that’s the essence of the Keynesian affliction. The denizens of the Eccles Building – -overwhelmingly academics and policy apparatchiks – -rarely venture into the real economic world. They do believe, therefore, that the US economy is just a giant bathtub that must the filled to the brim with ‘aggregate demand’ and all will be well.
This post was published at David Stockmans Contra Corner on September 23, 2014.
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