Larry Lindsey: The Fed's Productivity Has Been Negative Since 2007

Fed's Performance Review

• 🎯 Larry Lindsey argues that a review of the Federal Reserve's performance would reveal they have not been doing a good job.
• 📊 He cites a test comparing the Fed's December economic projections to actual outcomes, noting an average error of 55% of their target.
• 📉 Lindsey suggests that simply setting a 2% target for all years since 2007 would have resulted in a lower error rate than the Fed's actual performance, indicating negative productivity.

Supervisory Failures and Criticisms

• ⚠️ The Fed's role extends beyond monetary policy, as evidenced by the Silicon Valley Bank failure.
• 📌 The head of SVB was on the San Francisco Fed board until the day before the bank's closure, and supervisory memos were ignored.
• 💡 Lindsey compares the Fed's attempts at improvement (like framework reviews) to bringing in consultants, with unclear long-term benefits.

Inflation and Market Signals

• 📈 The Fed is criticized for completely missing the uptick in inflation in 2021.
• 📉 A September rate cut of 50 basis points was met with a 60 basis point rise in the 10-year bond yield within a month, signaling that the Fed's actions were not aligned with market needs.
• 🗣️ Lindsey disagrees with those who believe the Fed is currently doing a fine job, reiterating that their contributions have been negative since 2007.