PRESTOPUNDIT -- "An intense brain-buzz, guaranteed" (2blowhards)

Greenspan -- flying by the seat of this pants. "We now have a new book from a former Fed governor that provides a glimpse of Greenspan's Fed. It's much messier than advertised .. Laurence Meyer served from 1996 to 2002. Before that, he taught economics at Washington University in St. Louis and ran a widely known forecasting firm. His book A Term at the Fed : An Insider's View .. focuses on economic issues [and] offers fascinating insights. By Meyer's account, Greenspan and the Fed often fly by the seats of their pants. Despite a staff of 220 economists armed with computer models, the Fed is regularly surprised. In 1996 and early 1997, unemployment (then close to 5 percent) was declining. By the models, tight labor markets should have increased inflation. But inflation was dropping. "We had never seen anything like this before," Meyer writes. There were other surprises. The Fed didn't foresee the Asian financial crisis, the extent of the stock market bubble or the 2001 recession. Meyer doesn't criticize the Fed staff, which he thought excellent. But there were limits to what could be predicted. MORE -- Robert Samuelson "By the Seat of His Pants" Posted by Greg Ransom | TrackBack