Search This Blog

Sunday, March 16, 2014

Yellen Defends the Fed

Janet Yellen, the new Fed head, defends our biggest bubble-blower in this video: On bubbles, bailouts and interest rate policy.

The Fed may be its own worst enemy. Here's what John Hussman has to say:
What the Fed has done instead is to completely lose control of the growth of monetary aggregates, in an effort to offset short-run, cyclical fluctuations in the economy, so as to promote maximum speculative activity and repeated bouts of resource misallocation, and ultimately damage the economy's long-run potential to increase production and promote employment.
In the face of our concerns about long-run consequences, some might immediately appeal to Keynes, who trivialized prudence and restraint, saying "In the long run, we are all dead." But we are not talking about decades. The insults to the U.S. economy, to U.S. labor force participation, and to the long-term unemployed are the largely predictable result of policies that have been pursued in the past decade alone.
Clearly, what we have is a well-meaning institution that has turned out to be more effective than any terroristic organization in destroying the American economy via resource misallocation, destroying jobs and attenuating the economy's long-run potential for production. According to Yellen, the Fed wishes to continue their mistaken and dangerous policies until the Schumer hits the fan.

Time to fasten your seat belts, because Chief Pilot Yellen is running the airliner straight into the ground. Maybe the Fed can be reformed, but we just aren't going to see it until the economy hits bottom... just like an alky has to hit bottom before recovery is possible. Does that mean a depression is necessary? Yes, and it could bring about a world war as well.