Janet Yellen won’t resign because then she’d be unimportant and nobody would pay attention to her. From Raúl Ilargi Meijer at theautomaticearth.com:
You would think, certainly if you were as naive and innocent as I am, that when you get offered the job of Chair of the Federal Reserve, you must be sure, before accepting, that you have the credentials and the knowledge required. If you don’t, it looks as if you don’t take the job seriously. Janet Yellen, who’s been Chair since January 2014, doesn’t seem to agree.
In a speech Tuesday for the National Association for Business Economics Yellen ‘honestly’ admitted that she doesn’t understand inflation, control of which is the Fed’s no.1 task (it’s debatable whether that’s a good idea). She doesn’t understand a bunch of other issues either. Those are her own words, not mine. Here are these own words:
“My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation..”
Clear enough, you would think. But she didn’t offer her resignation. And for an important post like Fed chair, that is a major problem. As she undoubtedly does. So why is she keeping her job? Doesn’t she realize that when you don’t understand the issues you deal with, you’re prone to make disastrous mistakes?
Yellen and her colleagues work with models, and the models are wrong. The Fed’s predictions for things like inflation are ridiculously off, all the time. That may be news to her, but it’s old hash for many people in her field. So that she’s surrounded solely by people who don’t understand these things either is not an excuse.
So what does she expect now? That she will start to understand them all of a sudden, after years and years of not being able to? That reality will change to comply with her models? We can discount the option that she will suddenly begin using entirely different models, they’re all she has. But what then?
Under her predecessor Ben Bernanke, who never conceded he had no idea either but still didn’t, the Fed lowered interest rates to near zero Kelvin and bought trillions of dollars in bonds and securities. Now Yellen for some reason thinks it’s time to get rid of the stuff.
To continue reading: Why Doesn’t Janet Yellen Resign?
