• BullionStar
    05/30/2016 - 21:24
    The US Gold Market is best known as the home of gold futures trading on the COMEX in New York. The COMEX has a literal monopoly on gold futures trading volumes worldwide, but very little physical...

Janet Yellen Is Caught Between A Rock And A Hard Place

Tyler Durden's picture


Via Monty Pelerin's World blog,

“Caught between a rock and a hard place” is a colloquialism meant to convey that there are either no options or at least no good options left. That describes quite nicely the position that Janet Yellen has been put into.

The US (and world) economy are not growing. Ben Bernanke and his counterparts in other countries pumped like mad to hide the dysfunction. Flooding with liquidity did nothing to heal the distortions and made them worse.

In his last meeting, Bernanke began to “taper.” Ms. Yellen came into this no-win situation, made worse by Bernanke’s parting shot. I suspect Bernanke was attempting to mitigate his role in the inevitable disaster that lies ahead. He will likely claim that the economy was doing fine when he left and that was why he began to reduce QE.

The implication Bernanke hopes to convey is that the economy was just hunky-dory when he departed. If this interpretation is correct, then Bernanke is truly a loathsome person. If, on the other hand, Bernanke truly believed that the economy was fine, then loathsome is an improper description. However, that brings “stupid” into play as it is just another in a long line of examples that suggest Bernanke had little to no understanding of what was happening.

Perhaps his most famous prediction was believing the housing market was fine prior to the crash. Silverunderground reported:

In January of 2007, Ben Bernanke said, “The housing market has looked a bit more solid, and the worst outcomes have been made less likely.” His view was that the fundamentals in housing were improving, thus reducing the risk of a crash.

The graphic below provides other examples (click image to enlarge):

There is no way to stop infusing liquidity into the economy without creating a massive recession/depression. The withdrawal process is much like that of a heroin addict. It is hell, but if you get through it, you will regain your health. Jim Sinclair explains:

The idea that stimulation, even if only in form but not reality, can be withdrawn without draconian economic results is simply false. Chair Yellen is truly dedicated to full employment and is going to go into shock over the next few short months at the divergence between her economic modeling, the behavioral economic projections and the degree of economic contraction in the US. She will revert to her long standing dovish viewpoint of the mandate of the Federal Reserve and move this hyper stimulation (4 trillion) into a higher gear than before.

Mr. Sinclair is correct in his conclusion. Whether his timing is correct will be known soon.

Bernanke, attempting to avoid historical comparisons to John Law, left Ms. Yellen holding this smelly bag. His exit does nothing to absolve himself from the blame. He and his predecessor Greenspan created the monster that will devour the economy. Regardless of whether Yellen is a hawk or dove, there is no avoiding what is coming. The Bernank is to blame, although Ms. Yellen will likely make matters worse in an effort to avoid the politically unpalatable outcome.

Political reality (Obama and Democrats plummeting in polls and likely to get slaughtered in the next election) suggest that Ms. Yellen has little time to continue the pretense of tapering. Her message from the last Fed meeting suggests she is laying the groundwork. The hard red line of 6.5% unemployment has been removed and replaced by some amorphous judgment call pertaining to economic conditions.

Ms. Yellen’s reversal will be hot on the heels of the first set of bad economic data. Markets, if they can hold out until then, will probably continue to rise after the policy change becomes public.

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 03/29/2014 - 20:18 | 4606630 LetThemEatRand
LetThemEatRand's picture

Yellen -- hmmmm, do I print and give money to my banker overlords, or...  Yeah, that.

Sat, 03/29/2014 - 20:21 | 4606637 prains
prains's picture

I wonder if he owns a Nail Gun?

Sat, 03/29/2014 - 20:34 | 4606676 Osmium
Osmium's picture

I sure hope he does, if not, he can borrow mine.

Sat, 03/29/2014 - 22:45 | 4606949 SAT 800
SAT 800's picture

Yeah, I have one he can use too. Really the title says it all for this article. Either way they blow it up; it'll be good for gold and silver; which is why they're so interesting as the main savings mechanism for a family or a person.

Sun, 03/30/2014 - 08:42 | 4607449 free_lunch
free_lunch's picture
The truth is out: money is just an IOU, and the banks are rolling in it.
The Bank of England's dose of honesty throws the theoretical basis for austerity out the window: http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-ban...
Sun, 03/30/2014 - 13:50 | 4607974 Kirk2NCC1701
Kirk2NCC1701's picture

Scary visual, but Yellin might be caught between Ben's... _ock and a hard place.

Now matter which way she moves, she's screwed and we get stuck with the mess.

Sat, 03/29/2014 - 20:24 | 4606644 toys for tits
toys for tits's picture

Explain again how she suffers.  


She has a highly paid job and will be wealthy forever... unless she doesn't convert some of her paper for PM's anyway.

Sat, 03/29/2014 - 20:25 | 4606648 prains
prains's picture

she suffers from migraines as her face transplant onto a giant q-tip has not completely taken

Sun, 03/30/2014 - 07:14 | 4607367 Waterfallsparkles
Waterfallsparkles's picture

Better than stuttering, stuttering, crooked finger, with hands always in a praying position. Or the quivering lip blue beard.

Sat, 03/29/2014 - 20:26 | 4606651 RafterManFMJ
RafterManFMJ's picture

It's quite strange how all out upper echelon Politicos and such do 'speaking tour' of the Kindom of Saud where they are paid hundreds of thousands, or even millions for their valuable speeches.

But none dare call it treason.

Sat, 03/29/2014 - 20:41 | 4606694 blindman
blindman's picture


Sun, 03/30/2014 - 00:02 | 4607084 UselessEater
UselessEater's picture

treason, treason, treason - I'm so sick of reading the "they're-stupid-don't-know-what-their-doing line", it crops up everywhere and distracts people from the fact these appointees have considerable intellect and resources to make informed decisions, instead they are conspiring to impoverish the many for a small few.


Sat, 03/29/2014 - 22:19 | 4606900 mvsjcl
mvsjcl's picture

It's such a transparent ploy--also the "autobiographies" and "memoirs"--as to be truly sickening.

Sat, 03/29/2014 - 23:10 | 4607008 SAT 800
SAT 800's picture

That picture of Benny is really something. What a character; it looks like he's trying out for a "what me worry" cover for MAD magazine.

Sun, 03/30/2014 - 07:18 | 4607372 Waterfallsparkles
Waterfallsparkles's picture

If you look closely it looks like he has a gold tooth in the back.  Who said he does not like gold.  He hides it well in his teeth.

Sun, 03/30/2014 - 11:14 | 4607652 drendebe10
drendebe10's picture

"There ain' nuthin uglier than an old white woman."  Fred Sanford 

Sat, 03/29/2014 - 20:21 | 4606636 Event Horizon
Event Horizon's picture

Michael Pento complteley erased form a CNBC segment... 


Pento: “First, let me just say this is the first time such an event has ever occurred.  But I’m confident about this, the idea didn’t emanate from CNBC’s headquarters.  It had to come from those who have an interest in maintaining power by making sure the public is kept as uninformed and apathetic as possible.  

But to answer your question, I think it was the fact that I laid out the math behind a sovereign debt collapse in both Japan and the United States.  I think so much of the quiescence in yields in the bond markets in both America and Japan depends on confidence.  



Sat, 03/29/2014 - 20:23 | 4606641 ATG
ATG's picture

Almost too late to fix America by impeaching DC


Sat, 03/29/2014 - 20:24 | 4606645 prains
prains's picture

the solution is about as far from political as Barry is from winning a shirts off game of basketball.

Sat, 03/29/2014 - 20:32 | 4606667 ATG
ATG's picture

What is your solution then?

Sat, 03/29/2014 - 20:42 | 4606698 prains
prains's picture

I'm not sure but I'd like it to involve BBQ sauce and nipples

Sat, 03/29/2014 - 23:06 | 4607001 SAT 800
SAT 800's picture

really. guts on the doorknob and brains on the windows.

Sun, 03/30/2014 - 15:19 | 4608200 Tall Tom
Tall Tom's picture





Finance and Economics are both MATHEMATICAL DISCIPLINES.


Most Math Problems have NO SOLUTION. This is especially true in the fields of higher Mathematics.


THERE IS NO SOLUTION. In any way, method, manner, shape or form this system collapses.


We are cooked. We sit and write the requiem for a dying Nation.


So you are concerning yourself with that which cannot be fixed. You cannot DO anything about it.


But you can take measures to minimize the fallout and be optimally set up to even prosper from it. That is what you CAN DO.

Sat, 03/29/2014 - 21:00 | 4606738 Dick Buttkiss
Dick Buttkiss's picture

"What is your solution then?"



Sat, 03/29/2014 - 21:05 | 4606749 prains
prains's picture

sounds DE-growth to me

Sat, 03/29/2014 - 21:16 | 4606771 Dick Buttkiss
Dick Buttkiss's picture

Not it you're talking about freedom.

Sat, 03/29/2014 - 21:26 | 4606793 prains
prains's picture

I've been married 25 years so the concept of freedom varies for me

Sat, 03/29/2014 - 22:11 | 4606881 Dick Buttkiss
Dick Buttkiss's picture

Freedom is a means, not an end.

You apparently thought mariage was, too.

Sat, 03/29/2014 - 22:15 | 4606890 prains
prains's picture

at the time i thought there'd be snacks, it wasn't a difficult decision

Sat, 03/29/2014 - 22:19 | 4606898 Dick Buttkiss
Dick Buttkiss's picture

Hunger dulls the mind. 

Hence, children.

Sat, 03/29/2014 - 22:24 | 4606915 prains
prains's picture

Hunger dulls the mind. 


tell that to the zombies

Sat, 03/29/2014 - 22:49 | 4606958 Dick Buttkiss
Dick Buttkiss's picture

All they are is hunger. That's why you can't tell them anything.

Sun, 03/30/2014 - 15:46 | 4608263 Tall Tom
Tall Tom's picture

Dissolution it just a euphemism for death...whether it be concerning a marriage or a Nation-State.


Why not give the message as cold and harsh as it deserves to be?


The Nation has bought the farm.


It is ready for the Dirt Nap.


It is as dead as someone on life support with failing kidneys and a heart that is too weak to maintain a Diastolic Pressure needed for dialysis...thus slowly poisoned.


The goose is being cooked. No more Golden Eggs are going to come from that goose.




(They are just too dense otherwise.)

Sat, 03/29/2014 - 20:22 | 4606639 buzzsaw99
buzzsaw99's picture

That yellenator is out there...

Sat, 03/29/2014 - 20:24 | 4606643 kaiserhoff
kaiserhoff's picture

This seems to be equal opportunity for idiot articles on ZH day.

The Fed has signaled a phase out of QE, and they really have no alternative.  Bubbleiciousness is showing up everywhere, and it has scared the crap out of them.  They still appear to be messing around in the repo market to hold rates down, but this too shall pass.

Mr. Yellen has no choice.  Look out below for stawks, housing, commodities and the lot.  Back to Mr. Market.  Enjoy the ride.

Sat, 03/29/2014 - 20:24 | 4606647 buzzsaw99
buzzsaw99's picture

Tapering goes out the window the first time stocks go down 10%.

Sat, 03/29/2014 - 20:37 | 4606683 kaiserhoff
kaiserhoff's picture

Could be Buzz, but what are the consequences?  The Median House costs $1 million with $10.00/hour wages?

Bernanke and Greenspan never had the balls to admit they were wrong.  Yellen doesn't have that baggage.

One thing I'm sure of, if they back off the taper they have lost all credibility and probably all control.

Sat, 03/29/2014 - 21:01 | 4606743 chubbar
chubbar's picture

The consequences are dire either way. The U.S. is running a trillion dollar deficit and every country (except apparently Belgium) is either divesting US treasuries or running a deficit themselves and not in a position to buy them. Who do you think is going to have to step up to buy these? If they taper, as you indicate, what happens to the interest payments on 17 trillion in debt paper the US gov't owes on AND what happens to the housing market/economy with the sharply higher rates (not to mention interest rate swap derivatives)? We are all fucked thanks to this ponzi scheme, and taper or not isn't going to make a bit of differnce. One of the paths they take will bring us to the scene of the crash a little faster is all, not sure which one though.

Sat, 03/29/2014 - 22:11 | 4606880 CrashisOptimistic
CrashisOptimistic's picture

How can there be consequences?  Nearly the entirety of total QE resides as excess reserves deposited at the Fed for 0.25% return.

The Money Never Got To The Economy.  So what if they taper it.  All it will do is reduce the collateral the banks have for funding derivatives trading.

Equities may fall, but rates don't have to go up unless the economy becomes explosively powerful.  Anyone see that happening?

Sat, 03/29/2014 - 23:04 | 4606993 SAT 800
SAT 800's picture

You don't understand. You're talking about rates that are controlled by Central Bankers. They only partially control, or influence would be better, some rates. Other, very important closely watched rates they don't contol at all. There are not only Bank Runs in this world. but Bond runs, and currency runs; we have seen all these things before. When, rather than if; sufficient numbers of people start selling their Federal Paper it's price will go down; which is usually commented on as a "rising interest rate"; the interest rate moves inversely to the price; and the Central Bank has absolutely no control over this at all. A failing economy would be an excellent trigger for this scenario. The Dollar/ fiat currency program / is a confidence game. LIterally, and precisely that; and nothing else but that. When the confidence goes; it's game over. You might say of the Fed., for instance, "our most important product is optimism". When their sunny anouncements aren't responded to by the audience; you will see consequences.

Sat, 03/29/2014 - 21:14 | 4606745 NihilistZero
NihilistZero's picture

+1000 Kaiser. Couldn't have said it more succinctly myself!


Sat, 03/29/2014 - 21:48 | 4606832 the question
the question's picture

But you have to consider the possibility that they continue to monetize the debt, but just not tell us.

Sun, 03/30/2014 - 11:06 | 4607635 Dollarmedes
Dollarmedes's picture

Belgium, much?

Sun, 03/30/2014 - 15:50 | 4608273 Tall Tom
Tall Tom's picture

One thing I'm sure of, if they back off the taper they have lost all credibility and probably all control.


One thing that I am sure of. They have already lost all credibility and all control.



Sat, 03/29/2014 - 23:30 | 4607041 css1971
css1971's picture

I think they are going to manage the decline. The big banks have been saved and that's what the fed exists to do.

Sun, 03/30/2014 - 15:55 | 4608280 Tall Tom
Tall Tom's picture

Let me see...Can they control China? Can they control China's Shadow Banks? Can China control China's Shadow Banks?


How are they going to "manage the decline" when they have lost control?

Sat, 03/29/2014 - 21:01 | 4606741 NihilistZero
NihilistZero's picture


I've thought the same for some time Kaiser.  Why would the Big 4 banks destroy the fiat dollar system that empowers them?  Everytime someone brings up things like quadrilions in derivatives I laugh. What does a promise on a promise of a contingency mean in the real world?  I  think this is why you see the world retreating fork globalization WW3 is going to be an economic war with counter party risk and energy concerns coming to the forefront. Everyone seems to be retreating to or solidifying through exspansion their trading blocks because everyone knows ALL the sovereign debt will be moot.

Sat, 03/29/2014 - 21:28 | 4606795 kaiserhoff
kaiserhoff's picture

Yes, the derivatives are toast. 

Buzz has been right about bonds for four long years.  My point here is fairly modest.  This experiment has been run.  We know what QE does.  It destroys living standards and price discovery, all to save a few corrupt mega-banks that could be easily replaced at a tiny fraction of the cost.  It also allows politicians to kick the can and avoid the hard choices.   Being in a position of "power" is going to be a lot less fun;)

Sun, 03/30/2014 - 09:47 | 4607522 Raging Debate
Raging Debate's picture

Well stated Kaiserhoff.

Sat, 03/29/2014 - 22:55 | 4606976 SAT 800
SAT 800's picture

It's not a rational roposition. "Why would a six year old destroy himself and the house he lived in while playing with dynamite and caps?". They'll destroy it through ignorance and a kind of divine insolence that comes from decades of insulation from reality.  They're very, very, foolish, and very, very, greedy; and way-way too big. It's not a stable situation.

Do NOT follow this link or you will be banned from the site!