Dean Baker’s commentary from last week that delved into the 2006 meeting transcripts of the Federal Reserve’s policy committee – Alan Greenspan’s ship of fools – contains this noteworthy section featuring former governor Frederic Mishkin that provides more evidence that economists are particularly ill-suited to run the economy.
Here’s what Frederick Mishkin, a Federal Reserve Board governor who later played a starring role in the movie Inside Job, had to say about the risks from the housing market in that same December 2006 meeting:
“I don’t see any indications that we will have big spillovers to other sectors from weak housing and motor vehicles.
In that sense, there’s a slight concern about a little weakness, but the right word is I guess a ’smidgen,’ not a whole lot.“
At that last meeting of the year, the major concern expressed was about inflation. Several FOMC members expressed concern that the unemployment rate at the time (4.5%) was too low to keep inflation in check. They hoped that slower growth in 2007 would raise the unemployment rate to a level consistent with stable inflation. They certainly got their wish about a growth slowdown, although they did have to wait until 2008 to feel its full effect.
If you haven’t already clicked on the link to the Inside Job excerpt in the quoted text, you can do so here. I don’t know about you, but, I just never get tired of watching that clip.