Krugminator2
Member

But are they the experts? The yield curve is the best predictor of recession. Their own website using market signals and not their "expert" opinions says this is the highest probability of recession since 1981, yet they are talking about their base case is no recession. https://www.newyorkfed.org/medialibrary/media/research/capital_markets/Prob_Rec.pdf I would say no point. I have seen no evidence that human judgment is a better predictor than markets. I would say they shouldn't exist. There should be a rules based system whether it is a gold standard or Taylor Rule or Friedman rule or nominal GDP targeting.

I know that is some sort of snarky response. I honestly don't know what you are getting at. Could you tell me? Are you saying they should continue to tighten so we get an even more severe downturn?

That take is why the Fed was so slow to deal with inflation and why they've now overtightened. The headline number is for the trailing 12 months so inflation won't look as bad when it flares up and will look worse even after it is beaten. M2 has had it biggest percentage decline ever. From page 232-233 of my copy of Money Mischief by Milton Friedman The Fed has done its job. But they went too far and historically you get a recession out of this. The 3 month and 10 year yield curve inverted October of 2022. The average lead time for recession is 18 months which would put a recession first qtr of 2024, but it can be multiple years as was the case in 2008. Worrying about inflation right now doesn't mean there will be less inflation long term. It probably does mean there will be an even bigger recession and more government stimulus and more Fed easing instead. I think we will look back on this and wish the Fed stopped tightening last year.

The unemployment rate was 20%+ in the Depression. It is 3.8% or so now. A car is actually more affordable using his numbers. Cars last four times as long and require less maintenance. Plus they are much safer and have a lot more features. The average sq footage for a home in 1930 was 1100 sq ft. It is a 2500 sq ft today. So an equivalent house would be 6.8 times income in 1930 vs 7.8 times 2023 income using his numbers. Hardly a big difference and especially so given how historically stretched home prices are right now from your chart.