“A slow sort of country!” said the Queen. “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” -Lewis Carroll, Through the Looking Glass

I have constructed a chart extrapolating the trend growth in nominal GDP* through 2013, along with the FOMC’s forecast of nominal growth through 2013.** Have a look:


[Click Image to Enlarge]

As you can see, by the Fed’s own forecast, we will remain under trend growth in NGDP through 2013. Indeed, by the fourth quarter, we will be 10.2% below the trend. That is roughly $1.7 trillion in potential output! I regard this as the “one chart to rule them all”, and it is what I point to when people ask me why we are experiencing a sluggish “jobless” recovery.

Always keep in mind, though, prediction is a fools errand over anything but the shortest of time spans. The key here is that there is only one way the prediction can be off such that it would benefit the economy. Those aren’t good odds to take.


*FRED
**Average of the central tendency.

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