Economy
FOMC Minutes: Recession & Depression Simultaneously
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The FOMC Minutes from the late October 2008 meeting are out, and as you can imagine it is far more somber than any minutes in recent years. The worse thing is that the projections look pretty bad, and we do not even think they are being objective enough. If you don’t think this is a recession or a depression just read through the full minutes. You will see a recession and you might get depressed…..
The crux is this: "Recent policy actions, including today’s rate reduction, coordinated interest rate cuts by central banks, extraordinary liquidity measures, and official steps to strengthen financial systems, should help over time to improve credit conditions and promote a return to moderate economic growth. Nevertheless, downside risks to growth remain. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability. IN SHORT: MORE RATE CUTS OR MORE CREATIVE ACTIONS
More important than any of the minutes is the OUTLOOK from the FOMC in the full minutes, and these are just the "central tendency numbers":
For a real range it is offering -1.0% to +1.8% GDP for 2009 and unemployment in a range of 6.6% to 8.0%.
Frankly, none of this matters. The government cannot forecast. Even the private sector has been unable to adequately forecast. We have been calling this an unofficial recession since the end of Q1. Even if we had all the data ahead of time via a crystal ball, it seems that the market would sell when it hits the tape.
Jon C. Ogg
November 19, 2008
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