Federal Reserve Bank of NY Model Projects 2 Years of Recession

The Federal Reserve Bank of New York has a dynamic stochastic general equilibrium (DSGE) model. Now, I will be the first to tell you not to trust in economic models, but that doesn't mean models are worthless. This model projects a wide range of possible outcomes making it fairly useless in some respects. Who cares if in the next two years, economists can project GDP growth will be in a ranges of 3 to 6 percent? The forecast is for growth and given the inaccurcies of forecasting, all the model tells you is growth is likely. The current forecast is far more valuable: it shows a midpoint probability of a two year recession. That tells us there are some serious problems in the economy that express themselves through the model.

Jeff Snider of Alhambra has some discussion here: Sorry Chairman Powell, Even FRBNY Now Has To Forecast Serious and Seriously Rising Recession Risk

The DSGE model is here with discussion and links to explainers if you want more info.

If nothing else, understand this: the Federal Reserve can't print a government that doesn't start a nuclear confrontation with Russia, that doesn't lockdown businesses, that doesn't force experimental mRNA therapy on citizens, the doesn't let criminals out of prison, that doesn't ban trading for oil or fertilizer, that doesn't restrict energy production. If they try to do something via money creation it will result higher prices and accelerated economic decline in these conditions.

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