Barack Obama's nomination of Fed governor Janet Yellen to be the next central bank chieftain is nothing but extraordinary when we consider how closely Mrs. Yellen has been to the policies of the current Fed ruler, Ben Bernanke. Those policies have over the long term weakened the US economy, have served to bailout a dysfunctional and corrupt politically engineered economic system and have the entire world now are QE junkies who can’t stop for fear of global collapse. What Yellen's nomination represents is an endorsement of last five years, which have generated below average economic growth and made countless Americans unemployed.
Yellen's policies will not destroy what is really holding back the US economy: Cartels in the service sector. (Services are our biggest economic sector - the government says it constitutes 80% of our GDP.) From lawyers to doctors to engineers to crane operators to stock brokers to nurses to ship crewmen to garbage men to accountants - the truly explosive growth of cartels in America in the last 50 years has structurally created higher prices for a host of services in the U.S. economy, and held millions of Americans back from good jobs. It has also dented quality enormously and denied free market capitalism.
These artificially high prices - shamelessly choking supply to needless raise cost - inflict real damage to America's economic superstructure. And Yellen's money-printing is going to do nothing to alleviate that. Her only hope can be if the cartels are forcibly disbanded (not a chance), or if people within the cartelized professions let their salaries fall or stagnant as she tries to raise the inflation rate (not a chance there either).
Analysts from major stock research firms are telling clients that gold should do well under a Yellen-run Federal Reserve, but what should do even better is the inflation rate. The incoming Chairwoman is committed to getting more people employed, and she thinks higher inflation is the solution. While her jobs-for-all goal is admirable, raising inflation to increase employment confuses what a central bank can do. The Federal Reserve cannot create jobs, but it can facilitate the flow of dollars in the economy (if the dollars actually make it to the real economy is for another article). If dollars aren't flowing, it can print them, and at times that can help, but it's not a panacea and won't help at all when there is not a financial crisis occurring.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for August 1st, 2014 | John Ransom
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for July 31st, 2014 | John Ransom