In the comments section of this Scott Sumner post on Econlog about the profession’s public letdown of 2008, Marcus Nunes excerpted quotes from the FOMC’s September 2008 meeting. While I have also done so in the past, I never noticed this particular quote from Janet Yellen that apparently inspired laughter among the participants:
MS YELLEN. I agree with the Greenbook’s assessment that the strength we saw in the upwardly revised real GDP growth in the second quarter will not hold up. Despite the tax rebates, real personal consumption expenditures declined in both June and July, and retail sales were down in August. My contacts report that cutbacks in spending are widespread, especially for discretionary items. For example, East Bay plastic surgeons and dentists note that patients are deferring elective procedures. [Laughter]
So Yellen is talking about NGDP and PCE taking respective nose-dives over the course of the previous three months, two hallmarks of a serious downside problem, but apparently adds an element of humor about deferred dental and cosmetic surgeries, to which the participants reacted with [Laughter].
This isn’t just a letdown. It is insult glibly added to injury from an ivory tower far far away by people who will never, ever experience the personal tragedy of the unemployment line inspired by a massive negative nominal shock. If this is not enough to convince skeptical holdouts that Fed accountability is sorely needed, I am not sure what is.
There is nothing funny about crashing the economy or the implied personal hardship for millions of people. This behavior is unacceptable and ought not be tolerated.