I watched Federal Reserve Chairman Janet Yellen's news conference
after announcing the Fed's no-action strategy of zero interest rates.
I had thought that a person in a leadership position would take some sort of action step when confronting an American and global economy that can be easily described as a politically created world of dog poop.
Yellen, as expected, continued the charade that government — and, in particular, central banks — is the answer.
It is understandable.
Her words and actions are merely an extension of how she sees the world. We are all like that.
A complex soup of genetics, upbringing, the environment, education, life experiences, and more.
Like the rest of us, Janet Yellen is the accumulation of all these factors in ways that caused her to continue zero interest rates as the official government policy.
I do not doubt her sincerity. What I disagree with is her world view that government is the answer to the problem instead of government is the problem.
She is an economist who neither has any actual real world experience nor understands the principles of accounting. But, then again, that is true of nearly all economists these days.
People who operate hot dog carts know more about everyday economics than all the data driven economists who see the world through theory and not behavior and cash flow.
Her background is that she went to prestigious schools, taught at prestigious universities — as a Keynesian proponent — worked for government on President Clinton's (that is Bill not Hillary) Council of Economic Advisers, and then in the Federal Reserve starting on the Board of Governors and working her way up to being chairperson.
Basically, another academic or government bureaucrat who never experienced worrying about keeping the customer happy, working for the next paycheck or paying for health insurance.
Her economic outlook demonstrates consistency from her Ph.D. to her most recent press conference. She thinks the Fed can stabilize the economy, create employment, and add a controlled bit of inflation which would be good for all workers.
Yellen is a follower of the economic theory called the modern version of the Phillips curve which involves strong beliefs about the relationship of unemployment and inflation. These beliefs, based on theoretical and empirical data, are then translated into the monetary policies which the Fed then imposes on all of us.
These sorts of economists, unlike say behavioral economists whom hot dog vendors must be to survive, think that the financial industry and government are her customers.
Unfortunately for the American economy, the monetary and other policies of the Federal Reserve cause the monstrous consequences to our lives.
What I perceived in the press conference was a person who despite lifelong beliefs in the power of government to control an economy recognized that something was terribly amiss, but could not accept it.
The problem presented to her, and the Fed was simple. Would vary the interest rate by a miniscule 0.25% cause the American and the entire global economy to crater?
Clearly by implication her answer was yes. Even changing the interest rate by a statistically insignificant amount is too great a risk to those she thinks she serves.
However, Yellen's explanation of why the Fed would continue a zero interest rate was a model example of bureaucratic data-babble mixed with jargon. A gobbledygook rationalization to justify her decision to do nothing.
What could she say?
Admit her life-long guiding economic beliefs don't work? That the Federal Reserve is merely manipulating the economy rather than let the free-market decide the value of capital investment?
That we are experiencing the consequences of the entire political process in the United States being so systemically corrupt that the American economy is likely beyond saving? That, she doesn't know what to do?
Or admit that even a trivial rise of the interest rate would collapse the manufacturing of profits from some $300 trillion of derivatives created by Wall Street banks and even more trillions of dollars of government debt?
Why did Yellen pick the do nothing approach rather than choose the free-market option?
Her inability to make even the slightest change is just normal human nature in circumstances like this when a person's fundamental dogmatic belief in how the world works is overtaken by reality.
She is scared.
You should be scared, too.
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