Economic Projections
Please consider the Economic Projections of FOMC Participants under their individual assumptions of appropriate monetary policy, September 2020.
Fed’s GDP, Unemployment, PCE Inflation Projections
GDP Projection
The Fed believes GDP will only contract 3.7% in 2020 then rebound 4% in 2021, and 3% in 2022.
Do you believe this?
Unemployment Projection
The Fed believes the Unemployment Rate will be 7.6% in 2020, 5.5% in 2021, and 4.6% in 2022.
Do you believe this?
PCE Inflation Projection
The Fed believes Core Personal Consumption Expenditure inflation (excluding food and energy) will be 1.5% in 2020, 1.7% in 2021, and 1.8% in 2022.
Do you believe this?
GDP Poll
Unemployment Poll
PCE Poll
My Take
- GDP: I will take the under. Way under. Much of the rebound was due to $600 pandemic stimulus checks that expired on July 25. This will be a huge headwind going forward.
- Unemployment: I am leery of games with the participation rate and labor force but I will go with higher.
- PCE : This one is humorous. For months, the Fed has committed not only to 2% but letting inflation run hotter than expected for some time to make up for needed lost inflation. Yet the Fed admits it will not hit its targets until 2023. PCE inflation, as measured, is a joke. So perhaps the Fed is on target.
Also see Fed’s Blather as Expected, No Hikes Through 2023.
Mish
The Fed has been, and will be, powerless to impact inflation. Despite everything the Fed has done, the best they have been able to muster is 1.3%, and that is with record amounts of intervention.
The reason they have not been able to do any better, is massive money destruction is causing deflation on a enormous scale, even though most of it is being “delayed” by forbearance. Money destruction is offsetting every dollar being borrowed and injected into the economy, and then some.
As with all interventions, the Fed used its most effective tools first, and they failed to have the impact they needed to turn this thing around. Anything they have left in their bag of tricks now will not be as effective.
As the tricks like forbearance end, the deflation that will come from the massive defaults, will occur. Nothing can stop that.
You need to understand that the Fed is fighting the deflationary money destruction with smoke and mirrors, and not real solutions. The markets have fallen for the show, but the real impact on the economy has shown the Fed to be powerless to do what it is supposed to do, and that is control inflation, and unemployment.
The markets and the real economy are diverging radically, and that means one of them are wrong. The smart people know which one…. The rest are still in the markets…
I think a reasonable outlook on the vast majority of gov’t statistics is to consider that they are issued for the benefit of gov’t itself.
They are not issued for the benefit of the average Joe. Taking that outlook, which I can’t see as being reasonably debated, should cast doubt on every single statistic issued by any gov’t funded alphabet soup agency. Yes, we can get into the nuts and bolts of why the GDP, CPI or various unemployment stats are ridiculous, but it’s kind of unnecessary in the big picture if you simply gauge intent.
Gov’t is a monopoly on violence/control and it’s going to do whatever it can to maintain that monopoly, including use of it’s court apologia to reinforce it’s supposed competence to the average Joe.
For inflation I like the Cleveland Fed 16 percent trimmed-mean CPI:
A weighted average of one-month inflation rates of components whose expenditure weights fall below the 92nd percentile and above the 8th percentile of price changes.
Makes far more sense the core PCE
Unintended consequences?
How the Fed’s Quick Action May Have Given Congress Cover for Inaction
By doing its job of stabilizing the financial system, it has reduced the sense of urgency for lawmakers to help ordinary Americans.
By Neil Irwin
Published Sept. 15, 2020
Want change? Replace the CPI with the NASDAQ as the official inflation index, causing some of the Fed’s money printing currently flowing into stocks & the rich to Social Security beneficiaries too. Let’s spread the benefits of MMT to those other than Wall Street & the rich. That’ll shake up a few marbles.
All these economic statistics and predictions are predicated on what happens with that Covid thing. We can pretend it is not there. Deaths above last year at this point is close to 250k.
The average US life expectancy is 78. That means 4.2 million people die here every year on average. If zero covid deaths were people that would die anyways, covid has attributed to 4.2% extra deaths this year.
If everyone of those lives could be saved for and additional 4.2% GDP hit, I still don’t think if would be worth it. In this hyper sensible world we live in, people would freak out to hear such a thing. The reality though is if the 4.2% GDP is correlated to increased poverty rate, that works out to almost 14 million people newly in poverty(low estimate). It’s not a good trade off.
Covid is not going away and wasn’t as soon as it got to Europe. It’s hear to stay and there is no changing that. Flatting the curve was the goal. It worked well. Hospitals are in good shape and until they are not things should stay open.
I tend to agree it’s here to stay. Hospitals may well be in good shape but it doesn’t seem to take long for that to change if the virus is left to its own devices.
“COVID-19 Is Here to Stay” – Scientists Predict That SARS-CoV-2 Will Become a Seasonal Virus
SEPTEMBER 14, 2020
You aren’t counting the longer term effects of disability people who have gotten Covid are now experiencing. I have no issue with stuff being open but not wearing masks and having large gatherings just doesn’t make sense no matter how you slice it. There are new larger outbreaks in every state where masks are not mandatory.
2024? That’s when all of the debt accumulated on the Fed’s balance sheet is suddenly forgiven/cancelled.
The thing circulating on conservative blogs is that the US is owed $1T by China in bonds that were never paid back.
It doesn’t have to be forgiven. We just need a few more zeros on our money. If a loaf of bread cost 2500 dollars our current 25? Trillion dollar debt is insignificant.
Inflation is always the solution when money has no intrinsic value.
I don’t believe any economic predictions, there’s too many unknown variables. However I also don’t think they’ve taken into account the likelihood of further damage to the economy from another Covid flare up. Mainland Europe are starting to see this happen, they’re a little ahead of us in the UK but now we are starting to see the numbers rise. Restrictions are getting tighter again as the virus takes hold. America is a little bit behind us so maybe in a couple of months a similar trend will take hold there.
Second time around it seems to be worse in some ways as people know what to expect. As well as the obvious health impact financial support is not likely to be so widespread but more targeted so people are more fearful of the economic consequences. It’s not very good for moral.
Covid is here. The sooner people start looking at it as at least a 5-10 year problem the better. Everyone will eventually get it.
I hope they don’t bring lockdown back. They destroy more than they save.
Btw in the US 4.2 million people die a year. Covid has accounted for 4.2% of that total if everyone of is assumed not to die this year.
330 million. Average lifespan 78 years. 4.2 million average deaths.
I’ll always take the under on GDP. That’s a no-brainer in a low-growth world.
On unemployment…..I have faith in the ability of the BLS to fake it. Remember how they gamed unemployment numbers post 2008? The numbers kept looking better and better, even when the real unemployment rate was north of 13%. My guess is that the pandemic will do way more to push people into retirement than the 2008 crash. Not just people who who work for wages either.
On inflation….the metrics have been so amended as to produce a useless number.
It begs the question…..if the cost of food and housing and insurance keep going up precipitously, will it matter to most of us regular people whether the Fed says inflation is 1%, 1.5%, 2%?……We still have to hedge. We hedge for real inflation, not Fed targets, right?
Does it matter that the velocity of money is falling right through the floor? That chart looks pretty ugly.
The Fed is playing a game of musical chairs……low interest rates keeps the asset bubbles inflated and the music playing. If it stops, bad things will surely happen.
The Fed is COMPLETELY trapped. Can’t raise interest rates even if inflation ramps but they can’t lower them because it does no good.
The only non painful solution(as crazy as it sounds) is to lower interest rates far enough bellow zero that they can pay interest on borrowed money at a high enough rate to have the loans pay themselves off with printed fed money. Short term solution.
The most likely (painful) solution is to let inflation run as the government goes full bore on printing(gov and fed). This would of course be very painful for the people but wipe out debt load for everyone with borrowed money.
The question is how long can the fed keep the wheels on this thing. 1 year – 5 – 60?
Cost Of Living Far Higher Than Official Inflation Rate, Harvard Professor Finds
Sun, 09/13/2020 – 15:00
Moore inflation predictor, which is just a mathematical extension, has inflation at 3.5% by April, when they year over year numbers will be compared to a time when oil was near $0 a barrel. That seems very reasonable to me.
“Magic suddenly happens in 2024”
2024 is an election year.
There were several prior comments, lost while recreating this post.
Last few days the frame freezes unless javascript or cookies are off, and doing that means no login etc… it’s fun though, because you have to scroll down to where you think it will freeze to be able to use the reply button, and then a bit more becuse it all jumps out of frame after pushing reply. Monument/android – same problem as a while back, not changing browser again though.
Thanks – I will report – but need to know what OS and browser.
No other reports of this
Reply from Maven Support
Thank you for asking for more details! It looks like the Monument browser had an update in the last week that fixed problems causing websites to load incorrectly or have performance issues, so the user will want to make sure they’re using the latest version.
There has also been a recent bug on our end causing users in regions where GDPR and CCPA are applicable to have problems with website performance that also sound similar to what they’re describing.
If they live in a country where those laws apply or have recently traveled to one of those countries, that might be source of the problem.
We’re currently working on fixing that bug, but in the meantime, if he’s only recently traveled to one of those regions but is no longer there, the issue is likely caused by a cookie that was placed during his visit that is stuck in his browser so we should be able to fix that already.
To test if that’s the case, could you have the user open the site in an incognito window (or a “private session” in Monument) and see if the problem persists? If it doesn’t occur in the incognito window, clearing all cookies associated with thestreet.com should fix this.
Thanks. I updated but no good, private browser no good. Had similar in Safari browser before and only worked by allowing specific cookies (login), I think I mentioned previously before which ones were causing problems . It would be GDPR in EU probably, it would be interesting to know how content is getting blocked – is there some kind of firewall or are browsers loaded here adjusted ? I would mess around with VPN but I already have the one channel available for that purpose in android assigned. People won’t complain of course, they cannot – I think most would just not visit a site that doesn’t work, or just not register if when cookies were on it jammed. To read your reply I had to disable cookies, now re-enable them and try to catch the reply box in the right place… and the page jumps about thirty columns after freezing so I have to add that in. Haha.