As the monetary world prepares for the monetary equivalent of D-Day, it bears reminiscing about the true lack of confidence that permeates away from the direct public front of the central bank. Yellen has declared that monetary policy will be “data dependent” but that isn’t truly the case. Any such data will be filtered into the Fed’s models, which are notoriously unreliable in any timeframe. After all, the reason we haven’t seen the end of ZIRP in America already is that very fact – staked out as “inflation” due to oil prices having become something entirely different than modeled “transitory.”

In other words, the models are already wrong about “inflation” which is a good deal more important to the monetarist than any member of the public. The fact that the FOMC has not been able to push “inflation” to its 2% target in more than three years is not something they brush aside, as it only furthers and compounds economic mysteries that abound.

There are reasons to doubt conventional economic theory. Many economists predicted a spiral of falling prices when the U.S. jobless rate soared during the crisis and then thought inflation would rise when unemployment plunged. Neither happened, though Yellen has maintained this year that the Fed was on course for rate increases, which would be “data dependent,” likely gradual, and with no pre-set path.

Any unbiased examination would at least consider the fact that the models are wrong, full stop, right at the start and quite possibly inappropriate for the modern times given just the errors in “inflation” forecasting alone. Throw in an economy that is substandard by every historical comparison and far too many relativistic patterns, and that would seem perhaps the most likely explanation given the ease of logic within the inquiry. But it isn’t even considered, or at least much considered, by economists:

This shows Yellen “is grounded in traditional modeling but she is well aware that there is uncertainty,” said Randall Kroszner, who served with Yellen as a Fed governor between 2006 and 2009.

“It is possible, though unlikely, the traditional models are just all wrong (and) we’re in a whole new world. But she’s not going to fly by the seat of her pants,” Kroszner said. [emphasis added]