Typically, economists are not much more than parrots for the officially-modeled results that are run out and treated ahead of time as if they were actually to have happened. If the Fed says it expects 4% growth in 2015, then you can bet almost surely that will be the major point of emphasis all over TV and print (including online). It was certainly the message of the middle quarters of last year, as GDP up to 5% was “unquestionably” going to be the reigning trend. All of the stumbles in the past were thought dead and buried to plague monetarism and orthodox economics never again.

In that respect, I suppose it would not be unexpected that economists might shed that parroted perch for staunch disbelief. This is, of course, one-sided as I highly doubt any economist would protest a surge in incremental “central tendencies” for GDP and “inflation.” But that isn’t what the Fed has done, instead giving up on the economy almost entirely. It can’t be easy for economists to hear that everything they have invested themselves within has been disproven.

On Wednesday, the Fed moved a step closer to hiking rates for the first time since 2006 by removing the word “patient,” but appeared overall dovish as it downgraded economic growth and inflation projections. Earlier Bloomberg pointed out that unlike in December, Fed officials no longer see economic growth reaching 3 percent — this year, next year, the year after that, or in the long run.

 

Deutsche Bank Securities Chief International Economist Torsten Sløk sent out a chart today that crisply shows how the Fed is becoming more and more pessimistic as time goes on.

If you actually observe FOMC behavior under its rational expectations theory and basis, this is not surprising either. Ever since the words “secular” and “stagnation” were put together in an accepted thesis, monetary policymakers have been under no real illusions about economic problems (internally), only their cause (which still alludes them). Publicly, they have no choice (in their theorized versions) but to proclaim the best in the hopes that their public confidence inspires that recovery at long last, or at least that their continued optimism doesn’t allow it to get any worse. In the end, it may not have mattered as they both blew credibility and proved themselves helpless almost simultaneously. It cannot be overstated that despite four sustained and massive QE’s there is no recovery coming; they threw everything they had at the economy and there still aren’t as many full-time jobs today as November 2007.

That doesn’t leave much left beside the Apple-ized Dow and stock buybacks on the S&P 500 to show for $4.5 trillion in “total factors supplying reserves” and the resultantly inert $2.8 trillion in “reserves” themselves. To which economists are taking it hard:

“The bottom line in the chart below is that the Fed is no longer expecting a strong rebound over the coming years. In my view, the risks are rising that the Fed is becoming too pessimistic about the outlook,” he said.

After seven years of no true economic advance, and continued emphasis over and over and over again on believing one was coming, the Fed is now “becoming too pessimistic?” You can only live the lie so long as it isn’t easily and obviously refuted. Facing up to that challenge is Step 1; it’s not so much pessimism as it is finally accepting observation.

Step 2 will be much more difficult as it will require radical alterations that I am sure “they” will not make without being forced to real reform. Monetary policy has already become so corrupted, taking over entire markets and functions, it cannot easily be undone. That difficulty includes breaking the news to the always-faithful.