Janet Yellen: The Chairwoman frozen in the headlights

Carly Fiorina, in reference to Hillary Clinton’s travel record as a Secretary of State, offered that “Hillary must remember that activity is not accomplishment.”  We can make the same observation about Janet Yellen’s first press conference.  Talking is not necessarily informing.

Video of conference

Did anyone watch the Federal Reserve Chair (person) issue her statement and field questions from the inquisitive financial reporters seeking substantive responses? In my opinion, not one question was answered.  And, I challenge anyone to detect an answer.

Transcript of Conference

Yellen is the professor who says nothing, a kindergarten teacher talking slowly as if to induce a naptime.  She soared to new heights of platitudinal banalities all choreographed to a tai chi delivery of Orwellian double talk.  And Janet Yellen is the most powerful woman in the world without an army.  How did that happen?  Democracy or even representative republicanism at work? No.

It is impossible to defend free markets and also defend what the Federal Reserve has become. This is central planning pure and simple.  Those free marketers that cheer the Fed must do a self-examination. 

May we audit the Fed and find out, at least, what has happened and where the trillions have gone?  Perhaps a six-month lag in the audit would be a sufficient buffer to avoid political interference.  Janet says “no.” That would make the Fed political, she offers.  But wait, isn’t the Fed run by people from the banking and brokerage industry?  Aren’t there some politics there, between the Fed and Wall Street?  And also some indiscretions regarding information dissemination?

Two years ago sensitive Federal Reserve statements were leaked to those who wished to profit from those leaks. Asked about why so long for an investigation, why so long for the Inspector General to discover “anything,” Yellen declined to shed light. 

A reporter asked:

There was a leak in the FOMC. We don't know what happened. I've asked. I can't get an answer, and now Congress is asking. Both parties want to know. I'm not going to ask about the IG's probe. I understand that's an active case now suddenly after two years of just sitting there. But I would like to ask what you've found at the Board. You weren't the Chairman then. You were a Vice Chair, I believe. So what answers do you have, and are you going to respond to Congress?

Where might one get real answers in today’s world? We get the Jay Carney, “hey, that was two years ago” response.  Seems like the game in Washington and the federal government is to get everything out to that “two years and its gone” notch. Come on, that was two years ago!  So we get the shoulder shrug on a theft of information worth millions of dollars to the right people at the right time.  This is just another reason why central planning is dangerous and leads to corruption.

Yellen can insert or omit a word such as “patient” into a Federal Reserve policy release and send the markets into summersaults.  If she misspeaks, or utters a surprising phrase, billions of dollars may change hands.  How far we have come, or gone, from a free market.

Remarkable is the time taken to say nothing.  For each statement leading one way, there is another countervailing statement creating the offset that nets out to a conclusion of nothing.  There should be a shot clock.

My conclusion is that Janet Yellen is frozen by the situation she inherited.  The stimulus is now a crutch.  The can being kicked down the proverbial road is now the size of a dumpster.  Talking but saying nothing, referencing a coming rate hike that seems always to be excused away by “new considerations” and “examining the data” is the delaying game that seems to work so well in Washington. 

In Janet’s defense, she has inherited the direst situation in Federal Reserve history. Bernanke was reined during the systemic crisis, but he did not inherit such a situation as Janet has inherited.  The Federal balance sheet debt she has on the books is five times the historical norm.  And the great “stimulus” has now turned into the great “crutch.” 

The Federal Reserve may have saved the system from the excesses created by the blind backing of ill originated and federally backed mortgages.  But now the Fed has created a new dependency, a “crutch,” and has forced money managers to all play along.  How can she even attempt to drain the punch bowl? 

Ben Bernanke wrote, in the Wall Street Journal, July of 2009, the road map for the Fed to disengage from its supportive measures.  Six years later, no steps to the exit.   Official language from the Fed is garbled and contradictory.  Yellen speaks one way, a governor the other.  Dovish comments seem to appear on market dips and hawkish comments on sharp market rallies.  Metrics are changed to avoid any tough decisions.  Once Bernanke said unemployment under 7%, then 6.5% would instigate an end to easy money.  With unemployment well below six, Yellen qualifies and hedges.  She moves the goal posts.


So in terms of certainty and providing metrics, we provided a metric or a threshold of 6.5 percent several years ago and told market participants and the public that we wouldn't consider it appropriate to raise rates as long as the unemployment rate was higher than that level. As long as inflation was well contained. But our policy needs to be data dependent. And we need to respond to incoming data and our assessment of incoming data in terms of where we think the economy is heading and how close we are to our objectives.

And there is the Federal Reserve’s promotion of inflation.  Question that.  There is no mandate to promote inflation.  In fact the mission statement of the Federal Reserve directs the Fed to promote “stable prices”.

“…conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.”

Promoting inflation, as all central banking decisions, hurts one group and helps another.  Central planning, as Hayek said, intentionally shifts burdens from one group to another.  Savers and the prudent have been punished now for six years by Fed policy.  Those benefiting are exactly those who instigated the systemic threat.

Europe is bolder, more direct.  They say they are taking interest rates to negative levels.  They admit they are going to “take” from you.  With the Federal Reserve, we get theoretical curves and adjusted data so the message is “we will keep rates at zero, and promote 2% inflation.”

Why doesn’t the Fed just say, we are going to “take” from you?  The audience doesn’t do the math, or they don’t have the questions prepared.  2% inflation with zero interest rates means that anyone with money in the bank is a victim of a deliberate plot by a pseudo government agency called the Federal Reserve, which is not Federal and has no reserves, to steal, manipulate, massage 2% of your savings into thin air.  Not a hand raised to question that which is full frontal theft.

And there is also the matter of hurting the middle class with faked low rates and no returns on savings.  Sure, mortgage rates are down, but how much have real estate taxes gone up to offset those rates?  And the middle class consumer is disarmed, stripped of any discretionary income or disposable income from interest returns, as are retirees.  How much consumptive power has been removed from the economy by the Fed failing to allow a fair and historical rate of return on savings?

I was hoping someone would ask Ms. Yellen what the terms “stable” and “moderate” mean at Federal Reserve board meetings.  2% inflation isn’t stable.  And the Fed is directed also, by the same mission statement, to promote “moderate” interest rates. You know, not too high and not too low.  Zero falls where, exactly?  If asked we can be certain that the response to those questions would be non-answers, protracted with slow deliberate linguistics.  The Fed can speak, but they won’t inform or act, for they are frozen by the magnitude of the situation, most of which has been of their own design.