NEW YORK (CNNMoney.com) -- The U.S. economy is likely to deteriorate further this year and unemployment will rise into 2010, according to the latest forecasts from the staff of the Federal Reserve.
This bleak forecast was presented to Fed policymakers when they met last month and lowered interest rates to near zero. Low interest rates are one key tool the central bank uses to try to spur economic activity.
According to the minutes from that meeting, the central bank is now predicting that gross domestic product, the broadest measure of economic activity will fall in 2009.
"I think that the Fed is really very scared right now -- like everybody else -- and they want to pull out all the stops," said David Wyss, chief economist for Standard & Poor's.
The Fed indicated that most members at its meeting expected a slow recovery to begin in the second half of the year, but that unemployment would still rise "significantly" into 2010.
Employers cut 1.9 million jobs over the first 11 months of 2008, which took the unemployment rate up to 6.7%. The December report will be released by the Labor Department Friday and economists surveyed by Briefing.com expect a loss of 475,000 jobs and that the unemployment rate will rise to 7%, which would mark a 15-year high.
The Fed cited a multitude of problems dragging down the economy besides rising unemployment, including stock market declines, low consumer confidence, weakened household balance sheets and tight credit conditions. It said business spending is also likely to fall due to weak retail sales and the credit crunch.
In addition, some members of the Fed expressed concerns that the economy could worsen even more than currently expected.
You know, if the Fed were merely responsible for maintaining a sound
currency, all the reading of economic tea leaves in their FOMC minutes
could be omitted. Instead of day-trading the economy, their sole
concern would be maintaining the money supply proportional to the size
of the economy, so that prices would remain stable.
How likely is it that the Fed's OTHER mandate of maintaining 'full employment' will ever be changed?
Close to zero, I'd guess. Lawmakers have an insane conceit that they
can manage the economy by tampering with the money supply, an extremely
crude lever with ugly side effects. Just as theoretically, you can
steer a car by artfully using the handbrake to put it into controlled
skids. But that's a terrible way to drive. And a terrible way to wreck
'Honey ... I deleted the bond market!'
From WRH Jan. 7 2009
"There is no actual money. A Federal Reserve Note is an instrument of debt. It is created out of thin air when someone takes out a loan from a bank.
The problem with such a system is that the moment it goes into operation, more money is owed than actually exists. For each borrower to be able to repay their loans, new borrowers must be found whose loan applications will create new debt and creation of new money. It is a pyramid scheme, because it works only as long as there is an ever-increasing population of borrowers at the very bottom.
But nearly after 100 years of the Federal Reserve, the entire nation is up to the neck in debt, and there are no new borrowers taking out loans which can be used to create new money, even with near zero interest rates. So, the government has embarked on a program of massive borrowing on your behalf, $8.5 trillion of it so far which works out to about $100,000 per taxpayer, but this is a holding action that cannot last because the ability of the government to repay those loans rests on the American people, who are barely able to pay their own debts, let alone take on another $100,000 each that the government borrowed for them.
This is why the actual use and destination of the money is irrelevant and why it's not really a big deal when Wall Street companies throw huge parties and pay executives bonuses with the money; the purpose is to force the population to borrow more, to allow the Federal Reserve to create new money to put into circulation.
And in the long run, it cannot work, because the end result is the plunge in the dollar and in all those treasury certificates the US Government is printing up as part of the dog and pony show.
This is why Bernie Madoff is getting a free pass for his Ponzi scheme. The whole system; the entire Federal Reserve has been a giant Ponzi scheme, lasting almost a century.
And it is starting to come apart."
The Fed would know best since they are the biggest problem. They are planning to continue pouring money into our economy which they know will eventually devalue or destroy the dollar. An easy prediction for them to make - things will get worse.
Central banking is endorsed by Karl Marx along with A progressive income tax. Among many others.
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Wellies dealt a bad hand this there's no explanation