Fed Guzzles Salt and Fresh Water Ideologies while Washington Strikes a "Dairy Deal"

­Welcome to Capital Account. As we begin 2013, we reflect on some economic predictions that never came true. After the Fed’s unprecedented actions in 2008, some predicted massive double digit inflation by now. Yet headline consumer price inflation, as of November 2012, was below 2 percent. And as for inaccurate predictions, Federal Reserve’s expectations of growth over the past 10 years have greatly overstated actual growth. These inaccurate predictions are now the basis for Fed policy, as the FOMC announced in December “The Committee…currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as…inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal.” We talk to Pragmatic Capitalist Cullen Roche about why so many wrongly predicted inflation and what the Fed’s overly optimistic past predictions mean for its future interest rate guidance. He breaks down monetary mechanics and his view on why this understanding is missing from mainstream economics.

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