Jocular Truth Telling by the President of the Federal Reserve Bank of San Francisco

By Bob English

The President of the San Francisco Fed, John Williams, toured Yahoo Financial headquarters in Midtown Manhattan on Monday, May 11, 2015.  Afterwards there was a brief Q&A, in which he proved quite candid.  

Someone asked Williams what warning signs might precede the next financial crisis.  He responded to the effect, "Have you read my research papers regarding the Great Moderation [prior to the financial panic of 2008]?...I'm the last person who should be answering that question."  Laughter ensued.  

The "Great Moderation" moniker turned out to be as ominous and inaccurate as Irving Fisher's 1929 assessment of the stock market as having reached a "permanently high plateau."

As a reminder, Williams serves as a current voting member of the FOMC throughout 2015.  Not only will he vote on one of the most important interest rate policy hikes in Fed history, his own predictions regarding future GDP, employment and price inflation are embedded in the central tendency statistics released by the Fed after each FOMC meeting.  Literally, the entire bond market is influenced by the predictions of Williams and his Fed cohorts.

Yes, the Fed will raise interest rates soon.  Yes, the consciences of the voting members of the FOMC will be temporarily allayed by the results of their own manipulated boom.  And yes, they will ultimately miss the telltale signs of the [beguiling-to-them] inevitable bust phase.

At least Williams got a few laughs from his self-depreciation.  Would that other mainstream economists be as honest in their assessments of central banker omniscience.  Except that they have.  See Bernanke's 2014 farewell speech, or the 2009 missive from a leading establishment economist lackey (hint: it's Paul Krugman).

Time to start taking the Fed at its word: these guys have no clue of what's going on in the "economy."  Prepare accordingly.