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Mark Thoma Puts the Most Bizarre Picture in My Mind...

Mark Thoma: Has the Fed Learned Its Lesson?

Mark Thoma:

Economist's View: Has the Fed Learned Its Lesson?: I have been pretty critical of the Fed throughout the crisis. I still don't think policy is aggressive enough, and the Fed has been behind the developments in the economy due to its propensity to see green shoots that aren't actually there. But at least it's leaning in the right direction….

Chairman Bernanke said the monetary policy committee does "not anticipate further substantial declines in the unemployment rate over the course of this year. Looking beyond this year, FOMC participants expect the unemployment rate to continue to edge down only slowly toward levels consistent with the Committee's statutory mandate."… That is quite a change from Bernanke's pronouncement that the Fed was seeing "green shoots" in the economy back in 2009….

I don't think either monetary or fiscal policymakers have been aggressive enough throughout the crisis…. There's little chance that policy will march the aggressiveness I believe is called for…. But I'm becoming less concerned that the Fed will withdraw support too soon….

I think that's exactly the right stance to take -- hope for the best, but prepare for the worst. In the past the Fed let its hopes interfere with its preparation, but this time does indeed appear to be different.