Despite having a relatively positive outlook about the economy previously, the Fed today just downgraded all its forecasts and even mentioned the taboo “D” word, deflation.

I thought it would be fun to post a few of the more educated comments from CNN here.

Keynesian versus Austrian economic theory. Keynes 0, Austrians 1. Now pull up a lawn chair, pop a cold one, and kick back to the soothing hissing sound of every asset class deflating… ~ Jim Koutras

I got my beer chilling in the fridge.

You do realize that the only reason we’re in this mess is because the Fed flooded the economy with ever cheaper cash that encouraged mal investment? Why put money in a safe savings account @ .75% when you can make 20% plus in a mortgage backed security? It’s the keynesian way, keep the bubbble inflated until its bursts and then inflate another ~ Dave Fini

Match point.

I am nearly 70 years old and I have never known a person or a business who have spent themselves out of debt. Why do our democrat politicians think the federal government can do it? ~ Keith Long

Old people 1, Democrat Politicians 0.

The Fed is actually doing a good job managing a terrible situtation. It is faced with two bad choices: inflation (by expansionary policy) or deflation (likely would occur by doing nothing at this point). Inflation is bad but disinflation (leading to deflation) would be far worse for both our citizens and our government. Think about what happens with deflation – asset values fall relative to secured debt. This leads to a shift in wealth to lenders (i.e. banks and other countries). With inflation (which occurs when the Fed prints $), the dollar value of assets rises, current debts become less burdensome and easier to pay off (for both our citizens and our government). ~ Anonymous Facebook User

She’s actually kind of right, but only because the US has floated its entire economy and asset structure on an ocean of debt. Many people think the only way out for the US is to default on all its debt obligations and start over. Unless its economy grows and a massive pace, it simply doesn’t have the steam to ever repay its debt obligations, especially if you factor in medicare and all the other debts that the US doesn’t even keep on its books. Obviously defaulted forces hardship onto all the countries that lent the US money or bought its debt. But it’s not much different than when the US closed the gold window in 1971.

I’m just worried that Bush’s policies may have crippled our economy to the point that a long-term recession is inevitable, despite the best bailout efforts. ~Chris Vaccaro

It really seems inevitable at this point to me.

The FED? What a joke. The Federal Reserve Bank is not even a part of the Federal Government. They control monetary policy and have been a dismal failure since inception. Bottom line-The USA is BANKRUPT, and most Americans are sleeping through it. ~ Frank Michael

It’s true, the Fed is a private entity. Also true the US is in trouble.