Philly Fed to Introduce a Dartboard as Their Newest Economic Forecaster

In a press release issued last Friday, August 12th the Federal Reserve Bank of Philadelphia published their Third Quarter Survey of Professional Forecasters. The survey is released every three months and is used by banks, financial professionals and the government to gauge the economy and also helps the Federal Reserve to formulate and implement monetary policy. Here are their predictions for third quarter GDP and the full year as revised from the report released just three months prior on May 13:

  • The forecasters see real GDP growing at an annual rate of 2.2 percent this quarter, down from the previous estimate of 3.4 percent.
  • The forecasters see real GDP growing 1.7 percent in 2011, down from their prediction of 2.7 percent in the last survey.

Those are substantial revisions to previous estimates. The only thing worse than the “professional” forecasters’ ability to predict the correct numbers for growth, unemployment and inflation, are the numbers themselves—1.7% GDP growth, 9.0% unemployment, and 3.2% headline inflation in 2011 are some pretty egregious figures, particularly in a period where the economy should be experiencing strong, stable growth. Clearly, the Federal Reserve’s $2+ trillion monetary stimulus and 0% interest rate policy is not working and is subjecting the economy to serious inflation risk.

Why we grant so much power to those who possess such contemptible foresight is an embarrassment to all Americans. Maybe Philadelphia Fed President Plosser’s decision last week to dissent and vote against Bernanke’s monetary takeover of the United States was a reaction to the shame of failed precience and the realization that maybe Fed policy is the root cause of our weakening economy—not the solution.