At the risk of sounding like the black cloud in the room, I am amazed at what I am reading regarding yesterday’s Federal Reserve’s statement following its April Federal Open Markets Committee (FOMC) meeting.
We noted here yesterday how we were a little confused with the positive response to the poor Gross Domestic Product report showing back to back quarterly GDP declines of greater than 6% for the first time in more than 50 years.
Then yesterday afternoon the Fed released its statement. The Fed kept the target Fed Funds rate between zero and 0.25% and noted they would continue buying debt at the levels set at its previous meeting (some had expected/hoped they would increase purchases of Treasuries).
On the economy it stated in its opening sentence, “Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower.”
In other words, things are getting worse but at a slower pace. Somehow this was translated in nearly every wire story and analysis I read as the economy is getting better. How? Contraction is contraction. It is a bad thing. As noted yesterday some of us have gotten it into our heads that this is all in our heads. If we only kept a positive outlook, things would look positive.
Yes they put the obligatory positive spin in it, “Although the economic outlook has improved modestly since the March meeting,” it was clear that they didn’t attempt to signal ant type of recovery, “economic activity is likely to remain weak for a time.”
No one likes listening to a pessimist. It is depressing. But apparently too many of the so called experts are so divorced from reality that they think perception is reality. That has become a popular thing to say but reality is reality.
I am all for keeping a positive outlook but that is not the same things as deluding ourselves. Arguably one of the biggest contributors to our current economic crisis is our inability to accept hard truths. We went from one bubble to another to avoid taking a loss.
Tags: Economic outlook, FOMC
