Monday, September 22, 2014

Escape Velocity Failure (Musical Tribute)

February 28, 2013
Fed's Evans sees economy achieving "escape velocity" by 2014

"I am optimistic that we have appropriate policies in place to help the economy achieve escape velocity by 2014," he said, even as he acknowledged the downside threats to the economy from U.S. fiscal consolidation and economic troubles overseas.

September 18, 2014
Fed: Forget “Escape Velocity,” Not Gonna Happen, Ever

But beyond its crummy joke, the Fed has done something else: it has removed “Escape Velocity” – the economic surge in the US that has been falsely promised for five years in a row to rationalize soaring stock prices – from its vision of the future.

The Economic Projections of Federal Reserve Board members and Federal Reserve Bank Presidents, as the report is called, cut GDP projections for all years to come, as far as the Fed’s eye can see...


Sustainable Gains said...

There is no escape velocity.

Hussman's analysis shows that to simply get interest rates back up to about 0.5% on the short end, the Fed would have to "reverse QE" (that is, actually tighten) by something like 2 trillion dollars. Even if they wanted to do that, it would take years.

The alternative they floated as a trial balloon is to boost interest on excess reserves. But that would literally amount to giving banks handouts - welfare payments - for nothing. I haven't heard more about that but do not know if it's because (a) the idea died a suitable death or (b) they know it's politically toxic but they want to do it anyway, so they're keeping it quiet...

Stagflationary Mark said...

Sustainable Gains,

Surely our lean, mean, resilient, and strong economy could handle a tiny after dinner mint sized rate hike. It's only wafer thin, lol. Sigh. :(