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Federal Reserve Defense Pamphlet: Janet Yellen Edition
The latest spirited defense of the Federal Reserve system, and, implicitly, its totally uselessness, comes out of Fed apologist # xxx, FRBSF president Janet Yellen, who has jumped on the "St. Ben at the Top of the Polytheistic Parthenon" bandwagon. Yet Ms. Yellen's entire missive (attached below) boils down to the following paragraph:
This raises the broader—and very contentious—issue of whether monetary policy should seek to lean against potentially dangerous swings in asset prices. The answer is far from clear, because the use of monetary policy for these ends necessarily compromises the attainment of other macroeconomic goals. Because such use of monetary policy is costly, high priority should be assigned to developing regulatory tools to address systemic risk. Even so, the crisis of the past two years has prompted many of us to reexamine the widely held view that monetary policy should respond to asset prices only to the extent that they influence the anticipated trajectories of inflation and unemployment. Further research into the connections among monetary policy, the banking and financial sectors, and systemic risk is needed to help answer this question.
Ms. Yellen: we respectfully would like to say that you could not be more wrong. In essence your question of whether the Fed should inflate asset bubbles, defines the Fed's completely perverted and flawed agenda better than any other tongue-in-cheek elaboration for the continued worthless existence of your money printing syndicate.
That you conclude that "further research" is needed is precisely the demagogic bullshit the American public (of which 75% has said no more Fed secrecy ever, yet you and your cabal of Wall Street facilitators continues to ignore, at your own peril we might add) has grown to expect out of your ranks, and, not unexpectedly, grown to despise. Our only solace is that this is the very last bubble the Fed will blow. As that other puppet from the IMF said earlier, expect the complete devolution of contemporary society if in your infinite wisdom you proceed to bailout those responsible, for (and getting ever richer courtesy of) the current bubble. Which is why, Ms. Yellen, we suggest you pray that somehow you manage to keep inflating the massive ponzi house of cards you have started filling with so much hot air, for ever, or at least until such time as you are retired and far away from the loci of the various regional Federal Reserve Boards. Because not just 75% but the entire US population, will not take kindly to your destruction of all the built up multi-generational middle class wealth in the span of one Goldman calendar year (either December 31 or November 30 FYE). Which is precisely what you are in the process of doing, and no further taxpayer money needs to be spent on additional futile research.
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I have a difficult time envisioning Yellen in the Temple of Athena (Geithner yes but not Yellen)
Tyler:
Stop the word mincing and get to the point already.
Yellen's navel gazing which suggests in even the most cursory way that the Fed should consider its role in dealing with asset bubbles <inhale> is a bold step forward, in the sheltered worldview of a Fed official.
She knows what she's doing in laying the intellectual groundwork to be seen as a questioner of the status quo. Her hubby, George Akerlof is another "rogue" in Fed circles even though he is very much mainstream in his economic views. All this together is setting her up to be the anti-Bernanke, at least to tone deaf politicians.
Mark this people, if its not Bernanke, its Yellen. Moral of the story: don't hate the player, hate the game.
Audit the Fed!
Short of some kind of popular revolt, the only way to hate the game is to hate the players responsible for it. Yellen may be trying to distance herself from Ben 'Lightning Rod' Bernanke, but she's no friend of free markets. Incremental change isn't going to help, and these players need to be instilled with fear, even if they're talking about heading 5 degrees off Ben's course.
I agree, Audit the Fed! Then End It!
Ms. Yellen opines: "...high priority should be assigned to developing regulatory tools to address systemic risk."
American people respond: "Where the phuck have you been for the last decade?"
Yes, Janet, you can now be the girlfriend of the "nutty professor".
"...high priority should be assigned to developing regulatory tools to address systemic risk."
Until risk is embraced as a necessary aspect of a functional economy, dogma surrounding the 'panacea' of regulation will continue to obfuscate any rational discourse of economics.
+1 /// incredibly well said amigo
+1
Incredible cultural issue here.
Daedal
That is the absolute truth, and beautifully stated.
Risk? Why is risk necessary? I've posted this elswhere but it seems quite appropriate here (emphasis mine):
From The Privateer, Mid-November, 2009 (No. 642), page 5:
The Real Tragedy:
The fact of the matter is that in any functional economy in which markets (as well as money) are unhampered, risk taking is not necessary to live a full and prosperous life. In a functional economy, it is not necessary to be "financially literate" in the sense that the "Advisory Council On Financial Literacy" is pushing it. In a free market with sound money, one does not have to make a choice between ever more exotic forms of gambling and facing the prospect of increasing penury.
All that is necessary is to produce more than you consume and to have a reliable means of saving. In the nature of things, the future is uncertain. But at the very least, an individual living in what is labeled a free society should not be restricted to death and taxes as the only things he or she can "rely" on.
It is easy to scoff at those who believed what they were told when they took out mortgages they could not afford. It is easy to scoff at those who did not understand the obligations they were undertaking when they signed up for an interest only loan or signed up for a retirement or insurance fund which was bought on margin or "invested" in exotic financial "instruments".
Most of the people who did these things are trusting people. They do not understand that the money they use has been utterly debauched. They do not understand that the bank does not lend them money which has been deposited by someone else but creates their "loan" out of thin air. Many if not most of them still think that the US Dollar is "backed" by Gold. According to Ron Paul, there are even many members of Congress who believe this. It is not "financial ignorance" which is toxic. What is toxic is the drive by those who crave power to foster ignorance of fundamental economic and especially monetary principles.
Never has the drive to perpetuate financial ILLITERACY been as desperate and as flagrant as it is today. The reason for this should be clear enough. As the situation worsens, more and more people will start looking for and demanding answers that make some kind of sense. Our financial rulers have none to offer them. Their only hope is that their version of "financial literacy" can be perpetuated. It can't.
rocky, thanks for sharing this article.
but maybe the risk that daedal refers to is this?
the drive by those who crave power to foster ignorance of fundamental economic and especially monetary principles.
where is the dividing line between "trusting" & gullibility?
can not trust be developed/valued without continuing to set oneself up to be fooled over and over and over again?
Don't worry about Ms. Yellen she gellin'.
Fed speak gives me a headache.
Further research is code for "we know we are blowing a massive fucking bubble, we don't intend to stop".
The trajectory has been in motion for years. Fed Governors, Chairmen, Treasury Secretary's come and go, the trajectory remains. Each bursting bubble accelerates the trajectory, none have changed it.
The bailouts will continue. GMAC will get a 3rd lifeline, allowing Chrysler to offer 0% financing for 48ms on its 2010 models. They have to as each current decision must be viewed as a justification for each prior decision.
And around we go.....unfortunately we all know where we stop, the unknowable is when.
Further research is code for "we don't have a plan... but we're gonna spend money until we find one you'll buy"
From Andy Xie:
In modern economics, monetary stimulus is considered an effective tool to soften the economic cycle. While there are many theories about why monetary policy works, the dirty little secret is that it works by inflating asset markets. By inflating risk asset valuation, it leads to more demand for debt that turns into demand growth. In other words, monetary policy works by creating asset bubbles.
http://english.caijing.com.cn/2009-10-12/110279505.html
This is only half true. It only works when those being perpetuated by the ponzi can be convinced that there is an infinite horizon of "potential" growth (e.g. .com, housing, China, derivatives). The problem is monetary policy is increasingly narrower and narrower in focus and confidence more and more fleeting. A cirlce j between the banks as Rome burrns.
He gets into that in the subsequent paragraphs.
change the word 'soften' to 'create' and you might be on to something.
I agree fully.
I would love to see an infaltionista such as Xie in a debate with a defaltionistist such as Rosie
I have seen this suggested before. Not completely wrong in its observation. But, perhaps needs more detail in the exact influence of credit (debit demand) in asset appreciation and if it really achieves any type of useful price stability.
If price inflation is somewhat controllable, which I believe is true, then the FEDs actions obviously are used to inflate price. But, not for stability. Only for a known rising trajectory of some smooth profile, driven by the desire to expand credit and thus "growth" (in FED speak).
So yes, we can recognize the asset bubble effect, but how effective is FEDs monetary policy? It seems for price inflation, growth to some extent, can be throttled, but lowering prices through tightening is a uncontrollable step function.
This can be restated; that the FED can never really stabilize prices because it can not adequately control them. The bubble, like a toy balloon, is a very good analogy here, because it is blown up (controlled) and then pops (uncontrolled).
The key question is, does the FED really provide a price stability benefit above what could be garnered through the free market? I think the answer is no. So why do we need the FED for price control?
So really what can the FED do effectively? it has the power to regulate the BHCs. But, the FED chooses not to regulate the BHCs. They are left to regulate themselves.
So here again, why do we need the FED as a regulator?
Time after time the FED has demonstrated its inability or unwillingness to accomplish its mandated goals.
Mark Beck
FYI Tyler,
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=a0OvxJSr7EbU
If I were guessing, I would say Yellen and the Fed have serious control issues. Every time I read this or that explanation for more or less monetary control I think back to my readings on addiction and the addicted personality's obsession to control something that is ultimately uncontrollable.
Way past the point where saner minds would conclude they're unable to control, the addicted personality continues to concoct ever more elaborate and convoluted cause and effect reasons to justify and rationalize their continued efforts to control. From a distance we can see the person is his or her own worse enemy but the addicted is caught up in an ever tightening downward spiral into their own personal hell, a place I would not wish on anyone.
Even with the perspective of distance I feel the pull of the insanity. In fact I still find myself occasionally thinking that if only they did this or that, things might be better, we might just get out of this one somewhat intact. Then I shake my head to clear the insanity and remind myself there's no controlling the uncontrollable and any illusion of control is summed up with one word.
Madness.
Fiat money is the ultimate addiction, the ultimate enabler of codependent society.
CD,
Riddle me this: Why are you not a contributor on this site?
me riddle twice
3x
Daedal, tip e. canoe and Lizzy36,
Thank you for the flattering compliment. I guess the simplest answer would be that no one from Zero Hedge has asked me to become a contributor and I assume that's the only way to become one, by invitation only.
While I am in the business you may have noticed I rarely speak in depth on the financial aspects of what's going on. Instead I write about my understanding of why people and entities are doing as they do and why we humans act in the manner we do.
In my opinion, knowing this is absolutely necessary to forming a more complete understanding of who, what, when, where and why. But I suspect my approach doesn't exactly fit in with the ZH model of contributors, which I presume is probably why I haven't been invited.
But thank you for asking. I am humbled that you would find we Zero Hedge worthy.
I share your approach...if we attempt to understand the individual, not just what he does but why he does it, we can begin to understand, but never know completely, how the herd will interact within a complex, evolving system. Never an easy task, but it's a start.
And the big problem is they actually achieve all that control and are in fact self medicating. And it doesn't matter if we can heal them because they won't let us be thier doctors. It's easier to push everyone to the point where you force them deeply and severely damage you and then continue on with your justification of control.
One of the interesting things about the universe is how precisely it's replicated on earth. It attemps to purify you so that you become entirely awesome and then it throws you into the pool and counterfeits you. Our energy is in fact fungible to god just like our dollars are fungible to the fed.
So you have in fact hit on the precise causation effect of it all. But the universe is more interested in achieving the impossible and it's willing to sacrifice even simple decency to achieve it. Give the universe nothing pure as it is unable to return anything pure as long as it is capable of faking it and reaping your reward in your stead.
perhaps ms. yellen represents the 3rd stage in the fed's own kubler-ross model.
Sadly(and I hope I don't havde to live in one of them), I can visualize nursing homes conditions at the level of those horrific clips we saw in the early 90's of the special needs homes in Eastern Europe and Russia, by the time of her retirment.But even then,those affected could count on some generosity from the west,whose generosity is this country counting on?
There's a word that descibes these people.
Junkies
They are money junkies. And like any other junkie they will do whatever it takes to get their fix... their money fix. Lying, cheating, stealing from their own grandmother (or ours) to satisfy the insatiable greed.
A junkie is never satisfied with enough... they have to have more and more. If power is what gets them high they will seek power. If it takes money to get power they will steal the country blind to get more money... or take the country to war.
Look at the latest peace offering from Goldman. $500 million and an apology... after they stole billions! This is addictive behavior ... a junkie will react the same way ... sorry for what they've done and then turn around and do it all over again.
The difference is these people are doing it to the country. They are dangerous and they will do or say anything to retain their fix. They need to be removed.
"They may need a good talking to - or perhaps, something a bit stronger."
i suggest a healthy dose of ayahuasca
ayahuasca reference -- tip e., you from S. America?
not in this lifetime :>
Great analogy and don't forget the ultimate junkie end-game: a permanent deviation from reality propelled by pixie dust and prolonged till death!
"Because such use of monetary policy is costly, high priority should be assigned to developing regulatory tools to address systemic risk."
It's not my system. It's the system of the rich. Let it collapse.
The thing is that the FED is the source of systemic risk at this point. And it only adds to the addict thesis if, in fact, they earnestly think they need to address it anywhere else.
When I read that bullshit written by Yellen, I began to laugh hysterically and then wept for a while before throwing up into the nearest garbage can. It is hopeless. The Fed must be shut down before civilization itself is destroyed by those bumbling fools forever.
It takes forever to perfect fraud. Some say it's not worth it. But the FED is willing. There's free orange juice and cookies for people who sign up. They'd perform the experiments in Ireland but the participants started car bombing them instead. So someone has to sign up.