Tag Archives: Janet Yellen

Why Doesn’t Janet Yellen Resign? by Raúl Ilargi Meijer

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?

 

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Donald Trump’s Very Own Big, Fat, Ugly Bubble, by David Stockman

Since he’s been in office, Trump has done nothing to challenge Janet Yellen and the Fed’s bubble blowing. From David Stockman at dailyreckoning.com:

The overwhelming source of what ails America economically is found in the Eccles Building. During the past three decades the Federal Reserve has fostered destructive financial mutations on Wall Street and Main Street.

Bubble Finance policies have fueled an egregious financial engineering by the C-suites of corporate America. This bubble has skyrocketed to the tune of $15 trillion of stock buybacks, debt-fueled mergers deals and buyouts of the last decade.

The Fed fostered a borrowing binge in the household sector after the 1980s. It eventually resulted in Peak Debt and $15 trillion in debilitating debts on the homes, cars, incomes and futures of what used to be middle class America.

Liability Level 1

It also led politicians down the path of free lunch fiscal policy. By monetizing $4.2 trillion of Treasury and GSE debt during the last three decades, the Fed numbed the US economy from effects of crowding out and rising interest rates that would have come from soaring government deficits. This left the public sector impaled on Peak Debt.

Ever since Alan Greenspan launched Bubble Finance in the fall of 1987, public debt outstanding has increased by nearly 9 times. Measured against national output, the Federal debt ratio has risen from 47% to 106% of GDP.

Federal Debt Total 2

These actions have stripped-mined balance sheets and cash flow from main street businesses. The Fed has stifled economic growth while delivering multi-trillion windfalls into the hands of a few thousand speculators on Wall Street.

These rippling waves of financial mutation are why the US economy is visibly failing and why vast numbers of citizens in Flyover America voted for Donald Trump for president.

Ironically, even as he stumbled to his victory on November 8, Trump barely recognized that the force behind all the economic failure that he railed against was the nation’s rogue central bank.

To continue reading: Donald Trump’s Very Own Big, Fat, Ugly Bubble

Janet Yellen: False Prophet of Prosperity, by Ron Paul

Beware central bankers bearing prophesies of perpetual prosperity. From Ron Paul at ronpaulinstitute.org:

Federal Reserve Chair Janet Yellen recently predicted that, thanks to the regulations implemented after the 2008 market meltdown, America would not experience another economic crisis “in our lifetimes.” Yellen’s statement should send shivers down our spines, as there are few more reliable signals of an impending recession, or worse, than when so-called “experts” proclaim that we are in an era of unending prosperity.

For instance, in the years leading up to the 2008 market meltdown, then-Fed Chair Ben Bernanke repeatedly denied the existence of a housing bubble. In February 2007, Bernanke not only denied that “sluggishness” in the housing market would affect the general economy, but predicted that the economy would expand in 2007 and 2008. Of course, instead of years of economic growth, 2007 and 2008 were marked by a market meltdown whose effects are still being felt.

Yellen’s happy talk ignores a number of signs that the economy is on the verge of another crisis. In recent months, the US has experienced a decline in economic growth and the value of the dollar. The only economic statistic showing a positive trend is the unemployment rate — and that is only because the official unemployment rate does not count those who have given up looking for work. The real unemployment rate is at least 50 percent higher than the manipulated “official” rate.

A recent Treasury Department report’s called for rolling back of bank regulations could further destabilize the economy. This seems counterintuitive, as rolling back regulations usually contributes to economic growth. However, rolling back bank regulations without ending subsidies like deposit insurance that create a moral hazard that incentivizes banks to engage in risky business practices could cause banks to resume the unsound lending practices that were a major contributor to the growth, and collapse, of the housing bubble.

The US economy is already faced with several bubbles that could implode at any time. These include bubbles in student loans and automobiles sales, and even another housing bubble. The most dangerous of these bubbles is the government bubble caused by excessive spending. According to a 2016 study by the Mercatus Center, at least four states could soon join Puerto Rico and Illinois in facing bankruptcy.

Of course, the mother of all government bubbles is the federal spending bubble. Despite claims of both defenders and critics of the president’s budget, neither President Trump nor the Republican Congress have any plans for, or interest in, reducing spending in any area. Even the so-called cuts in Medicare and other entitlement programs that have generated such hysterics are not real cuts, but “reductions in the rate of growth.”

To continue reading: Janet Yellen: False Prophet of Prosperity

Yellen Against the Gods, by Bill Bonner

Is it wise to tempt fate? From Bill Bonner at bonnerandpartners.com:

“Even God Himself could not sink this ship.”

– Titanic crewman… The ship sank four days later

“It is our will that this state shall endure for a thousand years.”

– Adolf Hitler… 10 years before the Reich was destroyed

“Long-Term Capital Management”

– Hedge fund headed by Nobel Prize winner, bet against things that “couldn’t happen in a billion years”… Four years later, the fund blew up

“I have returned from Germany with peace for our time.”

– Neville Chamberlain… 11 months before the start of World War II

“Argentina Plans to Offer 100-Year Bond” (priced to yield only 7.9% until 2117)

– Bloomberg, June 19, 2017…

DUBLIN – Ring the bell. Open up the gates. Unleash the hounds of Hell.

Here’s Janet Yellen’s latest contribution to the Famous Last Words club:

Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.

This must be what the gods have been waiting for… What bread doth Ms. Yellen eat? What ale doth she drink? What is she thinking?

The weather has been so nice, Ms. Yellen is building a house without a roof!

Stacking Blocks of Wood

We don’t know any more than the Fed chief about when the next crisis will come. But we’re not fool enough to tempt Fate. And not vain enough to think we could do anything to stop it.

Financial crises come around from time to time. Generally, they come when you least expect them… that is, when they can do the most damage.

Our guess is that a crisis will begin before the end of this year. Why?

First, because falling oil prices and bond yields signal a slowing economy. A recession is already overdue.

To continue reading: Yellen Against the Gods

She Said That? 9/22/16

Yesterday, Janet Yellen denied any political influence whatsover on Federal Reserve policy. Donald Trump has suggested otherwise. From Yellen, at a press conference after the Federal Open Market Committee announced its decision not to raise interest rates:

“Well, I think Congress very wisely established the Federal Reserve is an independent agency. In order to insulate monetary policy from short-term political pressures and I can say, emphatically that partisan politics plays no role in our decisions about the appropriate stance of monetary policy. We are trying to decide what the best policy is to foster price stability and maximum employment and to manage the variety of risks that we see is affecting the outlook. We do not discuss politics at our meetings and we do not take politics into account in our decisions.

That should settle it, although a few of SLL’s more stubborn readers may still believe that Trump is right.

Janet Yellen’s Shame, by Bill Bonner

The contrast between honest capitalism and inherently dishonest central banking. From Bill Bonner at acting-man.com:

Playing Politics

In honest capitalism, you do what you can to get other people to voluntarily give you money. This usually involves providing goods or services they think are worth the price. You may get a little wild and crazy from time to time, but you are always called to order by your customers.

In the market economy, consumers reign supreme. There is no such thing as a “lost” vote in the marketplace; every penny spent affects production. Mises noted: “Consumers ultimately determine not only the prices of consumers’ goods, but no less the prices of all factors of production. They determine the income of every member of the market economy. The consumers, not the entrepreneurs, ultimately pay the wages earned by every worker, the glamorous movie star as well as the charwoman. With every penny spent, consumers determine the direction of all production processes and the minutest details of the organization of all business activities.”

That is true of honest banking, too. Back when such a thing existed, the job of an honest banker was to aggregate people’s savings and lend them to worthy borrowers. You make too many mistakes, your customers leave and you go broke.

Politics is a different game altogether. It produces no wealth of any sort. So the only way you can prosper in politics is to connive, cheat, and steal – manipulating your friends… sidelining your enemies… and exploiting the public.

It is a game of taking wealth, not making it. And you have no customers, so there’s not much of a check on how out-of-order you can get. Still, a politician is not always lying, not always stealing – and not always wrong. Occasionally, he blunders into honesty and slips into truth.

On Monday, for example, Republican presidential nominee Donald Trump said Fed chief Janet Yellen should be ashamed of herself for what she was doing to Americans and for creating a “false stock market.

US monetary base vs. the S&P 500 Index. Although base money growth has leveled out since 2014, the money supply has continued to grow since then due to commercial bank credit expansion. Since 2008 the broad true US money supply has increased by 128%, and this chart is a reminder that the money didn’t just “print itself”.  A great deal of it was created directly by the Fed, which the rapid growth in base money demonstrates. Newly created money doesn’t affect all prices simultaneously or to the same extent and for a variety of reasons, asset prices are always likely

US monetary base vs. the S&P 500 Index. Although base money growth has leveled out since 2014, the money supply has continued to grow since then due to commercial bank credit expansion. Since 2008 the broad true US money supply has increased by 128%, and this chart is a reminder that the money didn’t just “print itself”. A great deal of it was created directly by the Fed, which the rapid growth in base money demonstrates. Newly created money doesn’t affect all prices simultaneously or to the same extent and for a variety of reasons, asset prices are always likely to be at the top of the list (in other words, the above correlation is not a coincidence)

The financial press was quick to condemn Mr. Trump for “undermining confidence” in the Fed and the stock market. It was “irresponsible” to question the Fed’s integrity and its non-partisan mission, said the pundits.

Widely dismissed was the idea that Ms. Yellen was “playing politics” with the Fed by supporting the stock market to embellish President Obama’s last months in office and help Democratic nominee Hillary Clinton slide into the White House after him. But Mr. Trump is right: Politics is the Fed’s game.

 

To continue reading: Janet Yellen’s Shame

 

Trump Slams Yellen: The Fed Has Created A “Stock Bubble” And “A False Economy” To Boost Obama, by Tyler Durden

Donald Trump may shoot from the hip when he talks economics, but shot-from-the-hip truth is preferable to most economists’ carefully stated inanities, idiocies, and absurdities. From Tyler Durden at zerohedge.com:

One month ago, Donald Trump urged his followers to sell stocks, warning of “very scary scenarios” for investors, and accused the Fed of setting the stage for the next market crash when he said that “interest rates are artificially low” during a phone interview with Fox Business. “The only reason the stock market is where it is is because you get free money.”

Earlier today, speaking to a reporter traveling on his plane who asked Trump about a potential rate hike by the Fed in September, Trump took his vendetta to the next level, saying that the Fed is “keeping the rates artificially low so the economy doesn’t go down so that Obama can say that he did a good job. They’re keeping the rates artificially low so that Obama can go out and play golf in January and say that he did a good job. It’s a very false economy. We have a bad economy, everybody understands that but it’s a false economy. The only reason the rates are low is so that he can leave office and he can say, ‘See I told you.'”

He then lashed out at Yellen, whom he accused of having a political mandate when conducting monetary policy: “So far, I think she’s done a political job. You understand that.”

On whether we can have a rate hike in September: “Well, the only thing that’s strong is the artificial stock market. That’s only strong because it’s free money because the rates are so low. It’s an artificial market. It’s a bubble. So the only thing that’s strong is the artificial market that they’re created until January. It’s so artificial because they have free money… It’s all free money. When rates are low like this it’s hard not to have a good stock market.”

His conclusion: “At some point the rates are going to have to change.”

Indeed they will, and that’s precisely what almost every bank, from Goldman yesterday to Citi today, and many others inbetween, have been warning about in recent months.

Until recently, Trump’s latest anti-Fed outburst would have been swept under the rug as just another example of the deranged ramblings of an anti-Fed conspiracy theorist (trust us, we’ve been there). However, considering the spike in anti-Fed commentary in recent weeks coming from prominent, and established institutional sellside analysts all the way to the WSJ, it may be that Trump was once again simply saying what everyone else thought but dared not mention.

http://www.zerohedge.com/news/2016-09-05/trump-slams-yellen-fed-has-created-stock-bubble-and-false-economy-boost-obama