Wow, her first appearance on Capitol Hill and a recognizable tone has already been set! Newly appointed Federal Reserve Madam Chairwoman Janet Yellen recently appeared before the House Financial Services Committee and gave a statement that in my opinion will be as infamous as Ben Bernanke’s comments of, “House prices never go down,” and “We have subprime contained.” Amazingly, Yellen declared, “Market volatility did not seem to be due to Fed policy.” Indeed, it would appear the new Fed chairwoman has definitely come out of the box in typical Keynesian fashion. If perhaps something good comes from the actions of the Fed, and for the life of me I can’t imagine what that would be, then it is all the result of the policies implemented by a group of men and women who are playing experimental economics.
However, should the Fed announce a new policy called quantitative easing, which creates free money that flows into the commodity markets and thereby creates dramatically higher prices for the benefit of a few at the expense of many, I believe that Janet’s attitude would be “it’s not my problem.”
If a Federal Reserve program named ZIRP (a zero interest-rate policy) is initiated and the savings accounts of senior citizens are decimated, greatly impacting the ability for them to make ends meet during their retirement years, I suppose that Janet’s stance would be “it’s unfortunate.”
When the Fed’s continued monetization of debt results in a declining currency value and provides ample opportunity for hot money to flow in and out of emerging markets, resulting in high unemployment, failing businesses, and political turmoil, I imagine that Janet’s position would be “sometimes life is difficult.”
Apparently, while Yellen was immersing herself in the writings of John Maynard Keynes during her academic years, she failed to study Science 101. Consequently, it appears Janet never learned that for every action there is an equal and opposite reaction.
Unfortunately, Yellen announced that the current conflagration engulfing the world shows no sign of being a “substantial risk” to the U.S. economy at large. I surmise that Janet’s thoughts would be “we’ve had nothing to do with that.”
Evidently, the United States has become an island unto ourselves. According to Janet, all our actions create no reactions and anything that happens around the world has absolutely no effect on us whatsoever.
Contrary to some people who thought Yellen’s testimony was “as bland as one could imagine,” I found it to be extremely riveting and very insightful, especially in regards to the mindset of the new king (queen) of the mountain in relation to the power, effects, and even the responsibility of the Federal Reserve. God help us!
Along with his 40-years of dedication in the financial services industry, Bill is the President and CEO of GPSforLife, has recently authored a highly successful book entitled 44th: A Presidential Conspiracy, publishes his dynamic monthly financial newsletter MacroProfit, and faithfully continues his third decade on the radio with It’s All About Money, which can be heard weekdays on Money Radio in Phoenix and in podcast form on his website (and on smartphone apps) published at billtatro.com weekdays at 5pm Eastern. Bill can be reached via email at firstname.lastname@example.org and on Twitter @tatroshow.