Jackson Hole: Janet Yellen Is The Wrong Chairperson For the Fed

EconMatters's picture

By EconMatters  



Janet Yellen is the wrong Chairperson for this Monetary Phase


It is obvious in Janet Yellen`s brief tenure as Fed Chairperson that she is too dovish to be an objective leader at the Federal Reserve, she isn`t even the most qualified representative on the current configuration of the voting members. Her approach and economic philosophy might be acceptable in a full blown recession where by accident her approach might be appropriate to the economic conditions of a recession. But in a normal economy in the business cycle, and with the Fed sitting on a 4.5 Trillion dollar balance sheet, and bubbles in financial markets everywhere one throws a rock, she is a disaster waiting to happen.



Speed of Rate Hikes versus Gradual Rise


It all comes down to this crucial point, and it is the most important point in the entire ‘free money debate’ it is not a question of if markets are in a bubble territory, they are, but by how much? Therefore, the longer policy puts off the rate hike, the faster they will have to be in raising rates, and the more damage that occurs to bubbles, market participants, and the economy when the speed of rate hikes is exponentially faster.



Irresponsible to delay ‘Rate Rises in Gradual Manner’ versus ‘Waiting and Raising Too Fast’


Given this fact, it is an economic fact that risks go up also in an exponential manner with the speed of rate rises by the Fed, it makes no sense in fact to still be buying bonds. Furthermore, it makes even more sense to start raising rates at the September Fed Meeting by 25 basis points and continue raising rates in 25 basis point increments at every quarterly Fed Meeting until the 3% Fed Funds Rate level is reached. Take a pause at that level, and see if they need to continue towards 4.5 to 5% based upon how the economy is performing, inflation, and the labor market. 

However, given what everyone knows that the 10-year bond should not be at 2.4% yield, there are a lot of market participants that need to adjust to the reality of a normalized policy world, and they are so far from this reality due mainly to an incompetently dovish Fed led by Yellen, that the amount of re-pricing that needs to occur, even if they started raising rates today is just off the charts. It is the most crowded, and off-sides trade in the history of financial markets, given the sheer size of the market involved, it in short is a disaster waiting to happen! Janet Yellen is too dovish to signal any policy change in advance for market participants, by the time she does signal it is too late to avoid major market dislocations. This is just not competently managing market expectations; it is unacceptable for anybody in this position!


Risk Reward Calculation: Where are the Risks, and on What Magnitude?


When one factors the risks versus the rewards of Yellen`s dovish approach to date, one can only come away with the conclusion that she is beyond her depth in this job. It is completely irresponsible to take these risks when weighing stability of the entire financial system versus some mystical labor slack argument that some ‘retired’ workers might want to come back into the labor market if it gets even better. Yeah and I would like to have the same energy I had when I was 16 too, but I am sure not putting my whole life on hold waiting for some magical wonder drug to bring this about!

There are risks involved, and they are much more dangerous to long-term economic stability by being so dovish where one basically has their head stuck in the sand, and completely oblivious to more normalized economic conditions, and current monetary policy still being stuck in ‘end of the world’ recession bunker mode. 


James Bullard Acceptable Replacement for Balanced Views Regarding Monetary Objectives


I would personally replace Janet Yellen with James Bullard as he is more balanced than Charles Plosser, however after listening to Plosser at Jackson Hole, I think he is the best person for the job given where the current Fed`s balance sheet is, and the fact that we are entering the necessary tightening phase. He would be best able to manage this tightening phase as his approach is the perfect fit for what monetary policy objectives need to be in matching a normalized economy!



Charles Plosser Best Mind at Federal Reserve


Any rational minded and clear thinking individual who listened to his responses and thinking process on the issues at hand regarding monetary policy realizes that he nailed it on every account. Charles Plosser is spot on with his analysis of where the Fed is, and where they need to be with regard to an adjustment in monetary policy. I realize there are a lot of politics involved in being chosen Fed Chairperson, but apart from those, he is the best person for the job given where the Fed needs to be relative to the normalization phase in the monetary policy cycle.


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jvetter713's picture

Janey Yellenn is a puppet and the Fed is a criminal enterprise.  Fixed the title for you.

AdvancingTime's picture

 Janet Yellen has been head of the Federal Reserve bank long enough that we no longer need to speculate as to her job performance. As we begin to critique her ability to perform we must remember perception is often just as important as reality. Another issue that comes into play is how you stack up or compare to the person who held the position previously, this often extends to style as much as it does to substance.

As expected it appears Janet Yellen has chosen to take us down the same the rabbit hole as Bernanke on a journey to prove that if we just continue doing what is not working, all will turn out fine. Caution, this path leads down, and down, and down, farther and deeper then most can ever imagine. If asked to critique "Old Yellar" now playing in theaters everywhere I would by way of the reasoning above have to give her the maximum two solid thumbs down. More on this subject in the article below.


topspinslicer's picture

Is there a right person for an institution that should not exist, is immoral and unethical?

Yancey Ward's picture

I think the bond market is telling you that normalization of rates isn't going to be completed.  The Fed might make it to 2% at the short end before the economy goes right back into recession.  I think it won't even be able to get that far.

KingTut's picture

Stanley Fischer is the defacto chairman.  He wisely refused the chairman's role in exchange for the low profile, blame free vice-chairmanship.  His two students, Mario Draghi & Mark Charne,y complete the trumvirate.  

Janet is just a target to throw things at, diverting attention from Fischer.

RaceToTheBottom's picture

Every garden needs a gnome.


Flying Wombat's picture

Yellen Bamboozling With B*llsh*t At Jackson Hole

TND Exclusive: Eric Dubin


digitlman's picture

End the Fed and it won't be a problem any longer

Captain Willard's picture

This guy is such a painful idiot. The other day, he didn't know the difference between arbitrage and a carry trade. Today, he's comparing Fed governors who don't have a millimeter's difference in their approach to economics or central banking.

How do we know what the equilibrium rate is for the 10-year bond? The German 10-yr. Bund's yield is much lower than 2.4% currently. Why is he so sure that the non-intervention rate would be higher than 2.4%?

Please stop posting this guy's crap.

Market Analyst's picture


Actually the carry trade is used to do the yield arbitrage.

disabledvet's picture

Also used to figure out M&A as well.

Some of these deals have been huge...and a few bidding wars as well.

There is real money on this table...that's the point that keeps getting glossed over here. Jim Beam was bought for over twenty billion this year.  If I read this article correctly "meh, no biggie."

I think that's crazy and that's why MBA programs are a good thing.

The market can only in fact get one good thing from the Fed....namely consistency.  If the policy isn't anything to worry about...and I don't think it is...then everything comes down to focusing on running the bizness.

Recessions do happen.  So do corrections.  The problem with Wall Street isn't that it gives bad advice...but always the same advice. "Buy, buy, buy."  That actually is a second element of consistency that can be considered a given too.

Third is aggregate demand...it is always increasing, the more supply that comes on line the greater the demand.  There is a material inflation problem in North Dakota that no one talks about.  This is spilling over into demand for other things.  That says to me even if you knew a correction was coming going short is still a game of Russian Roulette.

Huge energy boom plus huge carry in the yield curve says to me there is a ,of of "implied growth" in this recovery.  Factor in the bias of the fed and wall street and lo and behold if equities don't suddenly surge while the yield curve flattens.

Also worth noting is Boeing increasing its dividend.  That's a signal "no slowdown here!" while implying there may in fact be a slowdown.

I think its called a "growth recession" but I prefer the term "mid cycle correction.". We've had a growth recession going on five years now...if not fifty!

kchrisc's picture

"Jackson Hole: Janet Yellen Is The Wrong Chairperson For the Fed"

The only requirements are a proven ability to take orders, lie, and obfuscate. She's perfect.

An American,not US subject.


"Guillotine the Fed!"

himaroid's picture

Cheap whiskey again this weekend. 

New American Revolution's picture

Best Mind at the FED???  That's an oxymoron if I ever heard one, kind of like Central Intelligence Agency, or, "Do you know a good lawyer?"  The best FED is a DEAD FED and the best mind there is the one who can tie their own shoelace while chewing gum before they turn out the lights.  It and this article are absurd.

Cheduba's picture

Yes, hooray for choosing which psychopath would be best at slowing down the crashing of this mofo! 

r00t61's picture

Yes, all I got from this article is that "Don Plosser" should replace "Don Yellen" at the head of the Mafioso table.

RaceToTheBottom's picture

If we must have a FED, I would rather have a spreadsheet running it.