Lake Erie Conservative

thoughtful discussion(s) about issue(s)

… Janet Yellen ‘ s Fed Nomination is …

Posted by paulfromwloh on Thursday,October 10th,2013

.. an absolute disaster . Clear and Simple …

.. Now that Janet Yellen has been named to lead the Federal Reserve , the global financial markets should factor out any possibility that the Fed will diminish their Quantitative Easing program anytime during her tenure . In fact , financial forecasts should assume that not only is a taper off the table, but that the QE program is now more likely to be perpetuated and expanded . That fact is in and of itself a disaster .

.. Unlike her predecessors,  Janet Yellen has never had a youthful dalliance with hawkish monetary ideas. Before taking charge of

In 1935, Cret designed the Seal of the Board o...

In 1935, Cret designed the Seal of the Board of Governors of the Federal Reserve System. (Photo credit: Wikipedia)

the Fed both Alan Greenspan , and to a lesser extent Ben Bernanke , had advocated for the benefits of a strong currency and low inflation . Both had warned of the dangers of overly accommodative policy and unnecessary stimulus. (Both largely abandoned these ideals once they took the reins of power , but their urge to stimulate may have been restrained by a vestigial bias against the excesses of Keynesianism). Janet Yellen , who has been on the liberal/dovish end of the monetary spectrum for her entire professional career, has no such baggage. As a result, we can expect her to never waver in her belief that stimulus is the answer to every economic question . When it is not .

.. Private Sector “stimulus” is the answer to our problems ; government “stimulus is not . Government stimulus means more taxation , more spending , more debt , and a fiscal disaster . Private sector “stimulus,” ie , a favourable investment climate , more favourable tax rates , and lower taxes , is what is needed most of all . The geniuses like Yellen think jobs can be invented out of whole cloth . It does not work that way . You will get demand , but you must have a strong currency ,  and supply – side investment incentives . The Keynesians have had their day . Their arguments have been a failure ,  every time they have they have been tried .

.. You look at things now , and we are somewhat lucky . Things overseas are much worse …

.. The Federal Reserve was originally charged with the single mandate of maintaining price stability . Along with it comes the stability of the financial system , and of the currency . Unfortunately , then came Humphrey – Hawkins Full Employment Act in 1977 . In recent decades that mission evolved into a dual mandate of seeking price stability and full employment . Eventually , H – H will have to go . Once it does , then the Fed can dip its toe (sometimes) into the arena of economic management . It does has some levers , but that stuff is best left to the remainder of the Government …

.. I believe that a Yellen – led Fed will return once again to a single mandate , but it will now focus only on employment . That could not be more wrong . Worse yet , it can and will be dangerous . Based on her clear beliefs in the ability of dovish monetary policy to relive human suffering she will be inclined to dig in her heels into the ongoing QE program more than anyone else President Obama may have appointed . This is terrible news for the U.S. dollar and the U.S. economy.

.. For now at least the crisis in Washington has squelched any immediate discussion of a taper in the remaining months of 2013. Any predictions that a Yellen-led Fed will somehow show more resolve towards responsibility in 2014 or 2015 should be looked at as delusional . Unfortunately , it will take a Burns – type collapse to get rid of her (with her resignation) ,  and then a Republican President can appoint a hard money hardcase to clean up the mess  …

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