Thursday, October 9, 2014

My Nomination for Hubris Quote of the Year

October 9, 2014
Bullard worried markets, Fed not on same page on rate outlook

Right now, “the markets are making a mistake” and expect the Fed to maintain its ultra-easy policy stance longer than Fed officials themselves currently expect, Bullard said.

What if the markets (and all of its many participants) are right and the Fed is actually making the mistake? I know, I know. That's just crazy talk. A small group of detached elitists holding meetings behind closed doors will always be smarter than the markets overall. That pretty much goes without saying.

Then again...

Perhaps the markets wonder why the Fed would need to raise interest rates if the price of oil keeps crashing, the global economy continues to sputter, and inflation therefore continues to remain stubbornly below the Fed's target?

February 6, 2012
Fed should raise rates in 2013, Bullard says

The belief that the U.S. economy suffering from an "output gap" that can be bridged only if borrowing costs are kept low enough for long enough is wrong, he said.

"If we continue using this interpretation of events, it may be very difficult for the U.S. to ever move off of the zero lower bound on nominal interest rates," Bullard said.

We didn't raise rates in 2013. Oops. As shocking as this must seem even in hindsight, we continued with ZIRP. Perhaps the markets remember what he said would happen if we continued? That it would be very difficult for the U.S. to ever move off the zero lower bound?

Perhaps the markets can remember even more? Could the markets think they are at least as smart as the Fed?

January 18, 2013
Fed Admitted Ignorance, Underplayed Severity Of Situation Just Ahead Of Massive Crisis, New Docs Reveal

If you want to feel confident that the Federal Reserve knows where it's going as it steers the world's biggest economy, then you probably should not read the transcripts of its 2007 policy meetings.

Those transcripts, released on Friday, show a Fed groping blindly for answers about the early market tremors preceding the financial crisis, while also blithely deciding that everything was probably going to be just fine.

The markets tend to create tremors heading into a crisis. The Fed tends to grope blindly. Perhaps that's how we can tell the difference between the two, lol. Sigh.

See Also:
Wasatch Economics: Fed failed to predict 2008 recession


dd said...

Perhaps the real problem is there are no markets; just digital outputs of some behavior by some individuals that is monitored somewhat or not at all in the case of dark pools. Perhaps markets are groping blindly relying on the Fed and the Fed is groping blindly relying on markets that do not exist in reality; but the lights are nice.

Stagflationary Mark said...


Perhaps! The lights are on but nobody's home? ;)