Quote of the Day: On The Fed’s departure from the real world

“There is going to be carnage in the casino, and the proof lies in the transcript of [US
Federal Reserve chair] Janet Yellen’s press conference. She did not say one word
about the real world; it was all about the hypothecated world embedded in the Fed’s
tinker toy model of the US economy…
    “In a global economy that is plunging into an epic deflationary contraction, Yellen
& Co still embrace mythical and un-measurable benchmarks for domestic full
employment and other idealised performance targets.
    “Indeed, since they operate in what amounts to the pseudo-scientific realm of
economic policy numerology, their model can be reduced to a voodoo style formula
expressed as 2,3,4,5.’
    “That would be 2% inflation, 3% real growth, 4% normalised Federal funds and 5%
unemployment. Any difference between those targets and current readings is defined
as “slack” or performance shortfall that the 12 apostles on the FOMC have been
mandated to close; and to do so with [their] blunt force instruments …
“The hard core reality, however, is that the very foundations of the Keynesian full
employment model cannot be measured, specified, validated or achieved. For all
practical purposes there is no such thing in today’s world as potential GDP,
full-employment, a natural rate of Federal funds, NARU (natural rate of unemployment)
or quantifiable price stability.
“These are all self-serving fictions fabricated by a small community of monetary central
planners and their Wall Street henchmen. And they do one big but destructive thing:
Namely, they are used to justify endless manipulation and falsification of the single
most important set of prices in all of capitalism—-the price of money and
financial assets.”
    ~ former Reagan Budget Director David Stockman, from his post
       ‘Sell The Bonds, Sell The Stocks, Sell The House —–Dread The Fed!’