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IPFS News Link • Economy - Economics USA

"The Fed Has Been Horribly Wrong" Deutsche Bank Admits,...

• http://www.prisonplanet.com

The reason why Zero Hedge has been steadfast over the past 6 years in its accusation that the Fed is making a mockery of, and destroying not only the very fabric of capital markets (something which Citigroup now openly admits almost every week) but the US economy itself (as Goldman most recently hinted last week when it lowered its long-term "potential GDP" growth of the US by 0.5% to 1.75%), is simple: all along we knew we have been right, and all the career economists, Wall Street weathermen-cum-strategists, and "straight to CNBC" book-talking pundits were wrong. Not to mention the Fed.

Indeed, the onus was not on us to prove how the Fed is wrong, but on the Fed – those smartest career academics in the room – to show it can grow the economy even as it has pushed global capital markets into a state of epic, bubble frenzy, with new all time highs a daily event across the globe, while the living standard of an ever increasing part of the world's middle-class deteriorates with every passing year. We merely point out the truth that the propaganda media was too compromised, too ashamed or to clueless to comprehend.

And now, 7 years after the start of the Fed's grand – and doomed – experiment, the flood of other "serious people", not finally admitting the "tinfoil, fringe blogs" were right all along, and the Fed was wrong, has finally been unleashed.

Here is Deutsche Bank admitting that not only the Fed is lying to the American people:

Truth be told, we think the Fed is obliged to talk up the economy because if they were brutally honest, the economy what vestiges of optimism remain in the domestic sectors could quickly evaporate.

But has been "horribly wrong" all along:

At issue is whether or not the Fed in particular but the market in general has properly understood the nature of the economic problem. The more we dig into this, the more we are afraid that they do not. So aside from a data revision tsunami, we would suggest that the Fed has the outlook not just horribly wrong, but completely misunderstood.

the idea that the economy is "ready" for a removal of accommodation and that there is any sense in it from the perspective of rising inflation expectations and a stronger real growth outlook is nonsense

And the kicker: it is no longer some "tinfoil, fringe blog", but the bank with over €50 trillion in derivatives on its balance sheet itself which dares to hint that in order to make a housing-led recovery possible, the Fed itself is willing to crash the housing market!

… if the single objective was to reduce inflation, regardless of where it came from, then crashing the housing market is certainly one way of going about it…. The dilemma for the Fed is of course that it is precisely the decision not to crash the housing market by doing extraordinary stimulus in the first place that has led to the current outcome of weak ex housing demand and strong housing inflation. The decision is akin to embracing financial repression as an alternative to the uncertainty of asset price deflation and a debt default cycle. If we could reset house prices 30 percent lower and fast forward a few years, the economy would probably be meaningfully more dynamic but it is those few years that might be hairy and no one let alone the Fed would likely stomach the risks.


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