EconomyCat is Sad

The next FOMC meeting is on the 27th, which means that here at the Chicago Fed we are busy as beavers, preparing our forecasts for the new year. At a department meeting this afternoon, there was abysmal news from nearly every sector and the mood was downright depressing. Financial markets? A few spreads are down from historic highs, which means credit conditions have gone from "outrageously bad" to "really bad." Labor? Last month's unemployment figures were uglier than Anna Nicole Smith. Manufacturing? Like Steve Jobs' weight, steel production is 41% of what it was a year ago. On the bright side, at least we don't have the inflationary pressures that we had a year ago, but this will change quite soon when the printing presses are running full-speed.

Toward the end of the meeting, we began brainstorming ideas for what to do when the economy is going to hell in a hand basket. As you might expect, there are no easy policy prescriptions, particularly when the federal funds target rate is already at/near zero. Should we continue introducing programs to buy troubled assets? This will at least keep the Acronym-Generating sector fully productive. What if we move into the business of buying longer-term debt? How can we justify buying some assets and not others, implicitly making value judgments on certain goods? Will the Fed be able to eventually disentangle itself when it needs to exit these markets?

At least the current situation makes for plenty of dark humor, as evidenced by the following comments:

"The unemployment numbers are in...the good news is, everyone in this room is still employed!"

(Looking at the S&P 500) "This is where I'd retire at 60, this is where I'd retire at 70, and this is where I'm never retiring."
Me: "Oh yeah? Well, this is where I pay for your social security."

"All the business guys want to know which sector is going to grow this year."
"Don't worry, academic publishing will save us all."

Let us all cross our fingers that Obama (and his $825B stimulus package) will prevent a crippling depression.

Finally, I particularly enjoyed these captions (courtesy of Dealbreaker) from yesterday's US Air plane crash in the Hudson. (Too soon? I've decided that since no one died, the answer is no.)