Fed’s Knowledge Of How LSAP Operates Is Flawed: Hoisington

Van R. Hoisington and Lacy H. Hunt, in their third quarter review, suggest that the Federal Reserve will remain unsuccessful in their quest for higher growth by continuing Large Scale Asset Purchases (LSAP).

Fed’s economic forecasts repeatedly off the mark

The analysts contend that judging from the repeatedly over-optimistic economic projections made by the Fed, “they are misunderstanding the way their actions affect the economy.” According to the analysts, the Fed’s projection that real GDP could grow 2.7% in 2013 is likely to be off the mark by nearly 50%.

A key assumption the Fed makes is that higher stock prices could boost consumer spending, but this is at odds with econometric studies, which suggest...