A Comprehensive Breakdown of America’s Economic House of Cards | First Rebuttal.
I was going over some of my older posts to review what was being discussed at the beginning of this year and what the perspectives were at that time. I found an interesting piece I wrote at the beginning of the year. I had just watched Janet Yellen’s inaugural panel hearing in front of the congressional finance committee members on Cspan. It’s basically a forum to allow the congressional financial committee members to directly pose comments and questions to the world’s most influential banker, namely, the US Fed chairman.
There were a few hardball questions but mostly just buttering up on Ms. Yellen from both sides of the aisle. Picking out a few of the interesting bits that came up in the course of discussion I was certain I saw a glimpse of honesty indicating that problems are on the horizon, from Ms. Yellen. The most notable commentary was her fairly forthright perspective that the CBO forward guidance depicted an imminent problem for America. What caught me a bit off guard was how easily the congressional finance committee members shrugged off the repetitive warnings from the Fed chair regarding this imminent problem. There was no discussion about possible solutions to the problem or even calls for further investigation to the warnings. It was simply dismissed. I found it incredibly ironic the one person in the world who is mandated to continuously increase leverage to the US was the one warning congress to get its fiscal house in order. Yet the congressional committee before her, acted as though they didn’t hear it.
However, subsequent to that initial committee hearing I’ve not heard any additional warnings from the Fed about getting the America’s fiscal house in order. It was a rare moment of honesty from a rookie chair and she apparently received a memo shortly thereafter informing her of the mistake. Now let’s take a look at specifically what Ms. Yellen was warning congress about. The CBO publishes annual long term forward guidance to give the world an idea of where things will be for the US 25 years out given where we are today. Forecasting so far into the future is no exact science and it relies heavily on assumptions. And so let’s take a look at the typical process.
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